Item 2.02 Results of Operations and Financial Condition.
The Company’s preliminary estimated unaudited revenues, research and development (“R&D”) costs and net loss for the year ended December 31, 2020 are set forth below. The Company has provided a range for these preliminary financial results because its closing procedures for its fiscal year ended December 31, 2020 are not yet complete. The Company’s preliminary estimates of the financial results set forth below are based solely on information available to it as of the date of this Current Report on Form 8-K and are inherently uncertain and subject to change. The Company’s preliminary estimates contained in this Current Report on Form 8-K are forward-looking statements. The Company’s actual results remain subject to the completion of management’s final review and its other closing procedures, as well as the completion of the audit of the Company’s annual financial statements. These preliminary estimates are not a comprehensive statement of the Company’s financial results for the year ended December 31, 2020, and should not be viewed as a substitute for full financial statements prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). In addition, these preliminary estimates for the year ended December 31, 2020 are not necessarily indicative of the results to be achieved in any future period. Accordingly, you should not place undue reliance on these preliminary financial results.
The preliminary estimated unaudited financial results included in this Current Report on Form 8-K have been prepared by, and are the responsibility of, the Company’s management. The Company’s independent registered public accounting firm, Meaden & Moore, Ltd., has not audited, reviewed, compiled or performed any procedures with respect to the preliminary financial results. Accordingly, Meaden & Moore, Ltd. does not express an opinion or any other form of assurance with respect thereto.
For the year ended December 31, 2020, the Company estimates that its revenues will range from $250,000 to $280,000, representing a decrease of approximately 76% compared to the year ended December 31, 2019, primarily due to a decrease in revenue from the Company’s contracts with the U.S Department of Defense that provided grants for preclinical studies and a decrease in revenue from the Incuron LLC service contract for continued preclinical development. The Company does not anticipate any revenues from its contracts with the U.S. Department of Defense in 2021 due to the completion of the contracts and grants in 2020. Service revenue from Incuron LLC is also expected to cease as the Company’s service contract with this company was not extended.
For the year ended December 31, 2020, the Company estimates that its R&D expenses decreased from $1.7 million for the year ended December 31, 2019 to between $0.6 million and $0.8 million for the year ended December 31, 2020, representing a decrease of approximately 58%. Significant reductions include an estimated $0.6 million reduction of funds spent on entolimod for biodefense indication due to reduced preclinical development activity resulting from the Company’s previously disclosed vendor delays in the analytical analyses required to complete the biocomparability study and the U.S. Food and Drug Administration (the “FDA”) having not agreed with the Company’s conclusions regarding the biocomparability study until the first quarter of 2020, which prevented further development progress from occurring, and a decrease of an estimated $0.3 million related to Curaxins. The Company anticipates that R&D expenses associated with the development of its drug candidates will decrease in 2021. However, should the FDA have questions regarding the pre-EUA submission, the Company could conduct unplanned studies as necessary to respond to the FDA questions, within the confines of current funding limitations.
For the year ended December 31, 2020, the Company estimates that its net loss will range from $2.3 million to $2.5 million, a decrease in loss of approximately 10% when compared to a reported net loss of $2.7 million for the year ended December 31, 2019. The decrease in net loss was primarily due to decreased R&D expenses, offset in part by an increase in general and administrative expense primarily related to the Company’s sale of securities in June of 2020 and the negotiation of the Merger.
As of December 31, 2020, the Company estimates that it has approximately $2.3 million in cash, cash equivalents and short-term investments, which are expected to fund the Company’s projected operating requirements and allow it to fund its operating plan, in each case, into April 2022. However, until the Company is able to commercialize its product candidates at a level that covers its cash expenses, the Company will need to raise substantial additional capital, which it may be unable to raise in sufficient amounts, when needed and at acceptable terms.
Cytocom’s closing procedures for its fiscal year ended December 31, 2020 are not yet complete and its actual results remain subject to the completion of its management’s final review and its other closing procedures, as well as the completion of the audit of its annual financial statements. The following preliminary estimates are not a comprehensive statement of Cytocom’s financial results for the year ended December 31, 2020, and should not be viewed as a substitute for full financial statements prepared in accordance with GAAP. However, it expects to report that it generated no revenues, incurred approximately $5.2 million in research and development expenses and incurred approximately $5.8 million in general and administrative expenses. Cytocom also expects to report that as of December 31, 2020, it has approximately $0.6 million in cash, cash equivalents and short-term investments, which together with cash raised in the first two months of 2021 are expected to fund its projected operating requirements and allow it to fund its operating plan, in each case, into May, 2021. Cytocom also expects that its audit report for the year ended December 31, 2020 will contain a paragraph expressing doubt about its ability continue as a going concern.
The information disclosed in this Item 2.02 shall be deemed “filed” under the Securities Exchange Act of 1934, as amended, and shall be incorporated by reference into the Company’s registration statements on Form S-3 (File Nos. 333-238578, 333-209232, 333-202387, and 333-192755).