Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This management’s discussion and analysis of financial condition and results of operations and other portions of this quarterly report on Form 10-Q contain forward-looking statements that involve risks and uncertainties. All statements other than statements of current or historical fact contained in this quarterly report, including statements regarding our future financial position, business strategy, new products, budgets, liquidity, cash flows, projected costs, regulatory approvals, or the impact of any laws or regulations applicable to us, and plans and objectives of management for future operations, are forward-looking statements. The words "anticipate," "believe," "continue," "should," "estimate," "expect," "intend," "may," "plan," "project," "will," and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements on our current expectations about future events. While we believe these expectations are reasonable, such forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control. Our actual future results may differ materially from those discussed here for various reasons. We discuss many of these risks in Item 1A under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2018. Factors that may cause such differences include, but are not limited to, our need for additional financing to meet our business objectives; our history of operating losses; our ability to successfully develop, obtain regulatory approval for, and commercialize our products in a timely manner; our plans to research, develop and commercialize our product candidates; our ability to attract collaborators with development, regulatory and commercialization expertise; our plans and expectations with respect to future clinical trials and commercial scale-up activities; our reliance on third-party manufacturers of our product candidates; the size and growth potential of the markets for our product candidates, and our ability to serve those markets; the rate and degree of market acceptance of our product candidates; regulatory requirements and developments in the United States, the European Union and foreign countries; the performance of our third-party suppliers and manufacturers; the success of competing therapies that are or may become available; our ability to attract and retain key scientific or management personnel; our reliance on government funding for a significant portion of our operating costs and expenses; government contracting processes and requirements; the exercise of control over our company are by our majority stockholder; the geopolitical relationship between the United States and the Russian Federation as well as general business, legal, financial and other conditions within the Russian Federation; our ability to obtain and maintain intellectual property protection for our product candidates; our potential vulnerability to cybersecurity breaches; and other factors discussed below and in our other SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2018.
Given these uncertainties, you should not place undue reliance on these forward-looking statements. The forward-looking statements included in this quarterly report are made only as of the date hereof. We do not undertake any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments. This management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and the related notes included elsewhere in this filing and with our historical consolidated financial statements and the related notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2018.
OVERVIEW
We are an innovative biopharmaceutical company developing novel approaches to activate the immune system and address serious medical needs. Our proprietary platform of Toll-like immune receptor activators has applications in mitigation of radiation injury and radiation oncology. We combine our proven scientific expertise and our depth of knowledge about our products’ mechanisms of action into a passion for developing drugs to save lives. Our most advanced product candidate is entolimod, an immune-stimulatory agent, which we are developing as a radiation countermeasure and other indications in radiation oncology. We conduct business in the U.S. directly and in Russia through two subsidiaries, one of which is wholly-owned, BioLab 612, and one of which is owned in collaboration with a financial partner, Panacela. In addition, we conduct business with a former subsidiary, Incuron, which will pay us a 2% royalty on future commercialization, licensing, or sale of certain technology we sold to Incuron. We also partner in a joint venture, GPI, with Everon Biosciences, Inc.
Financial Overview
Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these financial statements requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues, and expenses.
On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, income taxes, stock-based compensation, investments, and in-process research and development. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results may differ from these estimates.
Our revenue, operating results, and profitability have varied, and we expect that they will continue to vary on a quarterly basis, primarily due to the timing of work completed under new and existing grants, development contracts, and collaborative relationships.
Revenue
Our revenue originates from grants and contracts from both United States ("U.S.") federal government sources and Russian Federation ("Russia") government sources and service contracts with Incuron. U.S. federal grants and contracts are provided to advance research and development of entolimod, our lead product candidate, which we believe is of interest for potential sale to the U.S. Department of Defense ("DoD,") or the Biomedical Advanced Research and Development Authority of the U.S. Department of Health and Human Services ("BARDA"). Russian government contracts are provided to advance research and development of our oncology product candidates that may eventually be licensed for sale in Russia. We provide various research, management, business development, and clinical advisory services to Incuron.
Research and Development Expenses
Research and development ("R&D") costs are expensed as incurred. Advance payments are deferred and expensed as performance occurs. R&D costs include the cost of our personnel (which consists of salaries and incentive and stock-based compensation), out-of-pocket pre-clinical and clinical trial costs usually associated with contract research organizations, drug product manufacturing and formulation, and a pro-rata share of facilities expense and other overhead items.
General and Administrative Expenses
General and administrative ("G&A") functions include executive management, finance and administration, government affairs and regulations, corporate development, human resources, and legal and compliance. The specific costs include the cost of our personnel consisting of salaries, incentive and stock-based compensation, out-of-pocket costs usually associated with attorneys (both corporate and intellectual property), bankers, accountants, and other advisors and a pro-rata share of facilities expense and other overhead items.
Other Income and Expenses
Other recurring income and expenses primarily consists of interest income on our investments, changes in the market value of our derivative financial instruments, and foreign currency transaction gains or losses.
Recent Developments
As previously disclosed, in recent fiscal quarters, our research and development activity related to our development of entolimod as a treatment for acute radiation syndrome has declined as we were first awaiting the results of the bioequivalence study we undertook in response to the request of the Food and Drug Administration (the "FDA"), which study compared the historical drug formulation used in prior preclinical and clinical studies with the to-be-marketed drug product lots. Thereafter, we were awaiting the FDA’s confirmation that it agreed with our findings on bioequivalence, without which agreement the FDA had indicated it would not move forward to consider our pre-Emergency Use Authorization ("pre-EUA") application.
Since our submission of the bioequivalence study results, we have not received what we believe is a complete and fully satisfactory response from the FDA. Accordingly, we have been in ongoing discussions with the FDA, but our management has not been pleased with the pace or results of these discussions. We are therefore actively seeking ways to accelerate the FDA’s review and/or elevate within the management hierarchy of the FDA its consideration of our pre-EUA application.
Critical Accounting Policies and Significant Estimates
Our critical accounting policies and significant estimates are detailed in our Annual Report on Form 10-K for the year ended December 31, 2018. Other than as set forth below, our critical accounting policies and significant estimates have not changed substantially from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.
Fair Value of Financial Instruments
We use the held-to-maturity accounting method to determine the fair value of certain cash equivalents and short-term investments in United States Treasury Notes or certificates of deposit. As of September 30, 2019, we held approximately $0.4 million in certificates of deposit which we classified as Level 2.
We use the Black-Scholes model to determine the fair value of certain common stock warrants on a recurring basis, and classify such warrants as Level 3 in the fair value hierarchy. The Black-Scholes model utilizes inputs consisting of: (i) the closing price of our common stock; (ii) the expected remaining life; (iii) the expected volatility using a weighted average of historical volatilities of CBLI common stock and a group of comparable companies; and (iv) the risk-free market rate.
As of September 30, 2019, we held approximately $0.02 million in accrued expenses related to warrants to purchase common stock, which we classified as Level 3.
Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
Revenue
Revenue decreased from approximately $0.28 million for the three months ended September 30, 2018 to approximately $0.27 million for the three months ended September 30, 2019, representing a decrease of approximately $0.01 million, or 4.8%. This decrease is primarily due to decreases in revenues from our service contract with Incuron, offset in part by an increase in revenues from our JWMRP contract with the DoD for continued preclinical development of entolimod. Differences in our revenue sources, by program, between the years are set forth in the following table.
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
Funding Source
|
Program
|
|
2019
|
|
|
2018
|
|
|
Variance
|
|
DoD
|
JWMRP Contract (1)
|
|
$
|
236,405
|
|
|
$
|
122,759
|
|
|
$
|
113,646
|
|
DoD
|
PRMRP Contract (2)
|
|
|
6,302
|
|
|
|
1,017
|
|
|
|
5,285
|
|
Incuron
|
Service contract
|
|
|
26,928
|
|
|
|
159,531
|
|
|
|
(132,603
|
)
|
|
|
|
$
|
269,635
|
|
|
$
|
283,307
|
|
|
$
|
(13,672
|
)
|
(1)
|
The Congressionally Directed Medical Research Programs (CDMRP) Joint Warfighter Medical Research Program (JWMRP) contract was awarded on September 1, 2015.
|
(2)
|
The CDMRP Peer Reviewed Medical Research Program (PRMRP) grant was awarded effective as of September 30, 2015.
|
We anticipate our revenue over the next year will continue to be derived primarily from government grants and contracts. We anticipate that DoD revenue will increase in the next quarter, and continue to increase in the first quarter of 2020 as additional DoD-supported studies are expected to be initiated, provided that the FDA accepts the conclusions of our biocomparability study and that the DoD agrees with the proposed study protocol within the next fiscal quarter. We also plan to submit proposals for government grants and contracts to various funding sources, but there can be no assurance that we will receive future funding awards. The following table sets forth information regarding our currently active grants and contracts:
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019
|
|
Funding Source
|
Program
|
|
Total Award Value
|
|
|
Funded Award Value
|
|
|
Cumulative Revenue
|
|
|
Funded Backlog
|
|
|
Unfunded Backlog
|
|
DoD
|
JWMRP Contract
|
|
$
|
9,226,455
|
|
|
$
|
9,226,455
|
|
|
$
|
3,692,486
|
|
|
$
|
5,533,969
|
|
|
$
|
—
|
|
DoD
|
PRMRP Contract
|
|
|
6,573,992
|
|
|
|
6,573,992
|
|
|
|
86,537
|
|
|
|
6,487,455
|
|
|
|
—
|
|
|
|
|
$
|
15,800,447
|
|
|
$
|
15,800,447
|
|
|
$
|
3,779,023
|
|
|
$
|
12,021,424
|
|
|
$
|
—
|
|
Research and Development Expenses
R&D expenses decreased from $0.84 million for the three months ended September 30, 2018 to $0.26 million for the three months ended September 30, 2019, representing a decrease of $0.58 million, or 68.7%. Variances in individual development programs are noted in the table below. The net decrease is primarily attributable to a $0.26 million decrease in R&D expenses related to the oncology applications of the entolimod family of compounds, a $0.18 million decrease in R&D spending for biodefense applications of entolimod, and a $0.14 decrease in R&D spending on curaxins. The remaining variances are not significant.
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Variance
|
|
Entolimod for Biodefense Applications
|
|
$
|
231,082
|
|
|
$
|
408,358
|
|
|
$
|
(177,276
|
)
|
CBLB612
|
|
|
(554
|
)
|
|
|
12
|
|
|
|
(566
|
)
|
Entolimod for Oncology Indications
|
|
|
(729
|
)
|
|
|
259,465
|
|
|
|
(260,194
|
)
|
|
|
|
229,799
|
|
|
|
667,835
|
|
|
|
(438,036
|
)
|
Curaxins
|
|
|
25,269
|
|
|
|
158,237
|
|
|
|
(132,968
|
)
|
Panacela product candidates
|
|
|
7,342
|
|
|
|
13,341
|
|
|
|
(5,999
|
)
|
Total research & development expenses
|
|
$
|
262,410
|
|
|
$
|
839,413
|
|
|
$
|
(577,003
|
)
|
General and Administrative Expenses
G&A expenses decreased from $0.7 million for the three months ended September 30, 2018 to $0.5 million for the three months ended September 30, 2019, representing a decrease of $0.2 million, or 26.1%. This decrease consisted primarily of a $0.1 million decrease in CBLI's legal and professional fees related to the GPI investment in 2018, and a $0.04 million decrease in CBLI's property taxes.
Other Income and Expenses
Other income decreased from $0.14 million of other income for the three months ended September 30, 2018 to $0.05 million of other income for the three months ended September 30, 2019, representing a decrease of $0.09 million, or 63.4%. This decrease was primarily related to a decrease in the non-cash gain related to the change in valuation of our warrant liability as a result of stock price changes as well as warrant expirations.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Revenue
Revenue decreased from approximately $0.9 million for the nine months ended September 30, 2018 to approximately $0.7 million for the nine months ended September 30, 2019, representing a decrease of approximately $0.2 million, or 17.5%. This decrease was principally due to the decrease in activity under our service contract with Incuron. Differences in our revenue sources, by program, between the years are set forth in the following table:
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
Funding Source
|
Program
|
|
2019
|
|
|
2018
|
|
|
Variance
|
|
DoD
|
JWMRP Contract (1)
|
|
$
|
439,464
|
|
|
$
|
449,403
|
|
|
$
|
(9,939
|
)
|
DoD
|
PRMRP Contract (2)
|
|
|
9,099
|
|
|
|
2,095
|
|
|
|
7,004
|
|
Incuron
|
Service contract
|
|
|
295,958
|
|
|
|
450,976
|
|
|
|
(155,018
|
)
|
|
|
|
$
|
744,521
|
|
|
$
|
902,474
|
|
|
$
|
(157,953
|
)
|
(1)
|
The Congressionally Directed Medical Research Programs (CDMRP) Joint Warfighter Medical Research Program (JWMRP) contract was awarded on September 1, 2015.
|
(2)
|
The CDMRP Peer Reviewed Medical Research Program (PRMRP) grant was awarded effective as of September 30, 2015.
|
Research and Development Expenses
R&D expenses decreased from approximately $3.1 million for the nine months ended September 30, 2018 to approximately $1.4 million for the nine months ended September 30, 2019, representing a decrease of approximately $1.7 million, or 55.4%. Variances in individual development programs are noted in the table below. The net decrease is primarily attributable to a $0.7 million reduction in R&D spending for biodefense applications of entolimod, and a $0.9 million decrease in R&D expenses related to the oncology applications of the entolimod family of compounds. The R&D expense reductions for biodefense applications of entolimod resulted from our reduced preclinical development activity due to our previously disclosed vendor delays in the analytical analyses required to complete the biocomparability study and the FDA having not yet agreed with the Company's conclusions regarding the biocomparability study, which has prevented further development progress from occurring. We anticipate that R&D expenses for biodefense applications will rise as activity resumes under the DoD contract, provided that the FDA accepts the conclusions of our biocomparability study and that the DoD agrees with the proposed study protocol in the next fiscal quarter. The remaining variances are not significant.
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Variance
|
|
Entolimod for Biodefense Applications
|
|
$
|
1,033,006
|
|
|
$
|
1,731,932
|
|
|
$
|
(698,926
|
)
|
CBLB612
|
|
|
5,886
|
|
|
|
593
|
|
|
|
5,293
|
|
Entolimod for Oncology Indications
|
|
|
7,745
|
|
|
|
894,019
|
|
|
|
(886,274
|
)
|
|
|
|
1,046,637
|
|
|
|
2,626,544
|
|
|
|
(1,579,907
|
)
|
Curaxins
|
|
|
306,086
|
|
|
|
373,698
|
|
|
|
(67,612
|
)
|
Panacela product candidates
|
|
|
22,686
|
|
|
|
84,548
|
|
|
|
(61,862
|
)
|
Total research & development expenses
|
|
$
|
1,375,409
|
|
|
$
|
3,084,790
|
|
|
$
|
(1,709,381
|
)
|
General and Administrative Expenses
G&A expenses decreased from $2.0 million for the nine months ended September 30, 2018 to $1.5 million for the nine months ended September 30, 2019, representing a decrease of $0.5 million, or 27.2%. This decrease consisted primarily of a $0.24 million decrease in CBLI's property tax expense due to a reimbursement of prior year payments, a $0.15 million decrease in CBLI's legal and professional fees relating to the GPI investment in 2018, and a $0.05 million decrease in travel expense.
Other Income and Expenses
Other income decreased from $0.9 million of other income for the nine months ended September 30, 2018 to $0.1 million of other income for the nine months ended September 30, 2019, representing an income decrease of $0.8 million, or 90.6%. This income decrease was primarily related to the valuation of our warrant liability.
Liquidity and Capital Resources
We have incurred net losses of approximately $166 million from our inception through September 30, 2019. Historically, we have not generated, and do not expect to generate in the immediate future, revenue from sales of product candidates. Since our founding in 2003, we have funded our operations through a variety of means:
• From inception through September 30, 2019, we have raised $144.7 million of net equity capital, including amounts received from the exercise of options and warrants. We have also received $7.3 million in net proceeds from the issuance of long-term debt instruments;
• DoD and BARDA have funded grants and contracts totaling $60.4 million for the development of entolimod for its biodefense indication;
• The Russian Federation has funded a series of our contracts totaling $17.3 million, based on the exchange rates in effect on the date of funding. These contracts included a requirement for us to contribute matching funds, which we have satisfied;
• We have been awarded $4.0 million in grants and contracts not described above, all of which have been recognized at September 30, 2019;
• Incuron was formed to develop and commercialize the Curaxins product line, including its lead oncology drug candidate CBL0137. In 2015, we sold our ownership interest in Incuron for approximately $4.0 million and retain a 2% royalty interest in the CBL0137 technology; and
• Panacela was formed to develop and commercialize preclinical compounds, which were transferred to Panacela through assignment and lease agreements. RUSNANO contributed $9.0 million to Panacela and CBLI contributed $3.0 million plus intellectual property to Panacela. As of the date of this filing, CBLI owns 67.57% of Panacela.
We have incurred cumulative net losses and expect to incur additional losses related to our R&D activities. We do not have commercial products and have limited capital resources. At September 30, 2019, we had cash, cash equivalents and short-term investments of $1.9 million, which represents a decrease of $2.2 million or 53.5% since the end of our last fiscal year. This decrease was caused primarily by our net loss of $2.0 million during the nine months ended September 30, 2019. We expect our cash, cash equivalents, and short-term investments, along with the active government contracts described above, to fund our projected operating requirements and allow us to fund our operating plan, in each case, into September 2020. However, until we are able to commercialize our product candidates at a level that covers our cash expenses, we will need to raise substantial additional capital, which we may be unable to raise in sufficient amounts, when needed and at acceptable terms. Our plans with regard to these matters may include seeking additional capital through debt or equity financing, the sale or license of drug candidates, the sale of certain of our tangible and/or intangible assets, the sale of interests in our subsidiaries or joint ventures, or obtaining additional government research funding. There can be no assurance that we will be able to obtain future financing on acceptable terms, or that we can obtain additional government financing for our operations. If we are unable to raise adequate capital and/or achieve profitable operations, future operations might need to be scaled back or discontinued. The financial statements do not include any adjustments relating to the recoverability of the carrying amount of recorded assets and liabilities that might result from the outcome of these uncertainties.
Cash Flows:
The following table provides information regarding our cash flows for the nine months ended September 30, 2019 and 2018:
|
|
For the Nine Months Ended September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
Variance
|
|
Cash flows used in operating activities
|
|
$
|
(2,298,935
|
)
|
|
$
|
(3,441,076
|
)
|
|
$
|
1,142,141
|
|
Cash flows provided by investing activities
|
|
|
158,544
|
|
|
|
3,560,750
|
|
|
|
(3,402,206
|
)
|
Cash flows provided by financing activities
|
|
|
—
|
|
|
|
55,215
|
|
|
|
(55,215
|
)
|
Effect of exchange rate change on cash and equivalents
|
|
|
10,545
|
|
|
|
(26,698
|
)
|
|
|
37,243
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(2,129,846
|
)
|
|
|
148,191
|
|
|
|
(2,278,037
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
3,617,234
|
|
|
|
4,230,548
|
|
|
|
(613,314
|
)
|
Cash and cash equivalents at end of period
|
|
$
|
1,487,388
|
|
|
$
|
4,378,739
|
|
|
$
|
(2,891,351
|
)
|
Operating Activities
Net cash used in operating activities decreased by $1.1 million to $2.3 million for the nine months ended September 30, 2019 from $3.4 million for the nine months ended September 30, 2018. Net cash used in operating activities for the period ending September 30, 2019 consisted of a reported net loss of $2.0 million, which was decreased further for $0.1 million of net non-cash operating activities, and a $0.2 million net decrease due to changes in operating assets and liabilities. The $0.1 million of net non-cash operating activities consisted primarily of changes in the valuation of our warrant liability and a gain on disposal of equipment. The $0.2 million of changes in operating assets and liabilities consisted primarily of a $0.3 million decrease in accounts payable and accrued expenses, offset by a $0.1 million increase in accounts receivable and other current assets.
Net cash used in operating activities for the nine months ended September 30, 2018 of $3.4 million consisted of a reported net loss of $3.3 million, which was decreased further by $0.8 million of net non-cash operating activities, and offset by a $0.7 million net increase due to changes in operating assets and liabilities. The $0.8 million of net non-cash operating activities was due primarily to changes in the valuation of our warrant liability. The $0.7 million of changes in operating assets and liabilities consisted primarily of a $0.5 million decrease in accounts receivable and other current assets, and a $0.2 million increase in accounts payable and accrued expenses.
Investing Activities
Net cash provided by investing activities decreased by $3.4 million to $0.2 million for the nine months ended September 30, 2019 from $3.6 million for the nine months ended September 30, 2018. The net cash provided by investing activities for the nine months ended September 30, 2019 consisted primarily of $0.1 million of net sales of short-term investments and $0.04 million of proceeds from the sale of equipment. Net cash provided by investing activities for the nine months ended September 30, 2018 consisted primarily of $3.6 million of net sales of short-term investments.
Financing Activities
Net cash provided by financing activities decreased by $0.06 million to $0.00 million for the nine months ended September 30, 2019 from $0.06 million for the nine months ended September 30, 2018 due to a cash payment from the exercise of warrants during the nine months ended September 30, 2018.
Impact of Exchange Rate Fluctuations
Our reported financial results are affected by changes in foreign currency exchange rates between the U.S. dollar and the Russian ruble. Between January 1, 2019 and September 30, 2019, this rate fluctuated by 7.3%. For calendar 2018, this rate fluctuated by 20.6%. Translation gains or losses result primarily from the impact of exchange rate fluctuations on the reported U.S. dollar equivalent of ruble-denominated cash and cash equivalents, and short-term investments. Variances in the exchange rate for these items have not been realized; as such the resulting gains or losses are recorded as other comprehensive income or loss in the equity section of the balance sheet.
NASDAQ Compliance
As previously disclosed, on August 19, 2019, we received a written notice from the Listing Qualifications staff of the Nasdaq Stock Market LLC ("NASDAQ") indicating that the Company was not in compliance with Nasdaq Listing Rule 5550(b)(1) (the "Rule") as the Company’s stockholders’ equity, as reported on the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2019, was below $2.5 million, which is the minimum stockholders’ equity required for compliance with the Rule. We subsequently submitted a plan to NASDAQ explaining how we intend to regain compliance with the Rule. On October 18, 2019, NASDAQ notified us that it had determined to grant us an extension until February 17, 2020 to regain compliance. Under the terms of the extension, we must on or before February 17, 2020 complete one or more of the initiatives outlined in our plan and evidence compliance with the Rule. If we fail to evidence compliance upon filing our periodic report for the year ending December 31, 2019 with the SEC and NASDAQ, we may be subject to delisting.
The extension notification with respect to the minimum stockholders’ equity requirement has no immediate effect on the Company’s listing on The Nasdaq Capital Market. Although we will use all reasonable efforts to achieve compliance with the Rule, there can be no assurance that we will be able to regain compliance and maintain our listing on the NASDAQ Capital Market. If we do not regain compliance within the requisite time period, or if we fail to satisfy another NASDAQ requirement for continued listing, NASDAQ could provide notice that our securities will become subject to delisting.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.