{"url_path":"/sec/grce/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operation","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-18","source_url":"https://www.sec.gov/Archives/edgar/data/1444192/0001140361-26-025662-index.html","accession_number":"0001140361-26-025662","cik":"0001444192","ticker":"GRCE","issuer_name":"Grace Therapeutics, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1444192/0001140361-26-025662-index.html","primary_entity_key":"0001444192","primary_entity_name":"Grace Therapeutics, Inc."},"word_count":4362,"has_tables":true,"body_markdown":"Item 7.\n\nManagement’s Discussion and Analysis of Financial Condition and Results of Operation\n\n \n\nThe following discussion should be read in conjunction with our consolidated financial statements and notes thereto found elsewhere in this Annual Report on Form 10-K. This Annual Report on Form 10-K contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. You should review our Special Note Regarding Forward-Looking Statements presented at the beginning of this Annual Report on Form 10-K. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward-looking statements. For a detailed discussion of these risks and uncertainties, see Item 1A, “Risk Factors” of this Annual Report on Form 10-K. We caution readers not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Annual Report on Form 10-K. We undertake no obligation to update forward-looking statements which reflect events or circumstances occurring after the date of this Annual Report on Form 10-K, unless required by applicable securities laws.\n\n \n\nOverview\n\n \n\nThis management’s discussion and analysis (“MD&A”) is presented in order to provide the reader with an overview of the financial results and changes to our financial position as of March 31, 2026 and for the year then ended. This MD&A explains the material variations in our operations, financial position and cash flows for the years ended March 31, 2026 and 2025.\n\n \n\nMarket data, and certain industry data and forecasts included in this MD&A were obtained from internal surveys and market research conducted by third parties hired by us, publicly available information, reports of governmental agencies and industry publications, and independent third-party surveys. We have relied upon industry publications as our primary sources for third-party industry data and forecasts. Industry surveys, publications and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of that information are not guaranteed. We have not independently verified any of the data from third-party sources or the underlying economic assumptions they have made. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based upon management or contracted third parties’ knowledge of our industry, have not been independently verified. Our estimates involve risks and uncertainties, including assumptions that may prove not to be accurate, and these estimates and certain industry data are subject to change based on various factors, including those discussed in this Annual Report on Form 10-K.\n\n \n\nThis MD&A should be read in conjunction with our consolidated financial statements for the years ended March 31, 2026 and 2025 included elsewhere in this Annual Report on Form 10-K.\n\n \n\nOur annual financial statements, which include the accounts of our wholly owned subsidiary, have been prepared in accordance with U.S. GAAP and the rules and regulations of the SEC related to reports filed in Form 10-K. All intercompany transactions and balances are eliminated on consolidation.\n\n \n\nAll amounts appearing in the MD&A for the period-by-period discussions are in thousands of U.S. dollars, except share and per share amounts or unless otherwise indicated.\n\n \n\nOur assets as\nof March 31, 2026 include cash and cash equivalents of $16,977 and intangible\nassets and goodwill of $49,266. Our current liabilities were $2,146 as of March\n31, 2026 and were comprised primarily of amounts due to or accrued for\ncreditors.\n\n \n\nIn February 2025, we completed a\nprivate placement of Company securities with certain institutional and\naccredited investors. Net proceeds were $13,705. Refer to Note 7, *Stockholders’\nEquity -* *2025 Private Placement*, in the accompanying\nconsolidated financial statements elsewhere in this document for additional\ninformation. We believe our existing cash and cash equivalents will be\nsufficient to sustain planned operations through at least 12 months from the\nissuance date of the consolidated financial statements included with this\nAnnual Report on Form 10-K.\n\n \n\n61\n\n*Table of Contents*\n\nResults of Operations\n\n \n\nComparison of the years ended March 31, 2026 and 2025\n\n \n\nThe following table summarizes our results of operations for the years ended March 31, 2026 and 2025:\n\n \n\n             \n\n \n\nYear ended\n\n \n \n\n \n  \n\nMarch 31, 2026\n\n \n  \n\nMarch 31, 2025\n\n \n  \n\nIncrease (Decrease)\n\n \n\n \n  $  \n  $  \n  $  \n\n \n\n(in thousands)\n\n \n    \n    \n    \n\n**Operating expenses**\n\n    \n    \n    \n\nResearch and\ndevelopment expenses\n\n  2,405 \n  9,511 \n  (7,106) \n\nGeneral and\nadministrative expenses\n\n  8,672 \n  7,168 \n  1,504 \n\nLoss from operating activities\n\n  (11,077) \n  (16,679) \n  (5,602) \n\n \n    \n    \n    \n\nChange in fair\nvalue of derivative warrant liabilities\n\n  900 \n  3,218 \n  (2,318) \n\nInterest and\nother income, net\n\n  685 \n  711 \n  (26) \n\nForeign\nexchange loss\n\n  (1) \n  (17) \n  (16) \n\nIncome tax\nbenefit\n\n  1,700  \n  3,199 \n  (1,499) \n\n**Net loss**\n\n  (7,793) \n  (9,568) \n  (1,775) \n\n \n\nNet Loss\n\n \n\nThe net loss\nof $7,793 or $0.47 loss per share for the year ended March 31, 2026, decreased\nby $1,775 from the net loss of $9,568 or $0.79 loss per share for the year\nended March 31, 2025. The decrease in net loss was primarily due to a $2,318\ndecrease in change in fair value of derivative warrant liabilities, a $7,106\ndecrease in research and development expenses, and a $1,499 decrease in income\ntax benefit, partially offset by a $1,504 increase in general and\nadministrative expenses.\n\n \n\nResearch and development expenses\n\n \n\nResearch and development\nexpenses consist primarily of:\n\n \n\n●\n\nfees paid to external service providers such as CROs and CMOs related to clinical trials, including contractual obligations for clinical development, clinical sites, manufacturing and scale-up, and formulation of clinical drug supplies; and\n\n \n\n●\n\nsalaries and related expenses for research and development personnel, including expenses related to stock options.\n\n \n\nWe\nrecord research and development expenses as incurred.\n\n \n\nOur research and development during the years ended March 31, 2026 and 2025 were focused primarily on our clinical development program for our GTx-104 drug candidate.\n\n \n\n62\n\n*Table of Contents*\n\n The following table summarizes our research and development expenses:\n\n \n\n \n    \n    \n    \n\nResearch and development expenses\n\n    \n    \n    \n\n \n    \n  \n\nYear ended\n\n \n    \n\n \n  \n\nMarch 31, 2026\n\n \n  \n\nMarch 31, 2025\n\n \n  \n\nIncrease (Decrease)\n\n \n\n \n  $  \n  $  \n  $  \n\n \n    \n   (in thousands)   \n    \n\nTotal third-party research and development expenses1\n\n  938 \n  8,486 \n  (7,548) \n\nSalaries and benefits\n\n  1,249 \n  809 \n  440 \n\nResearch and development expense before stock-based compensation and depreciation\n\n  2,187 \n  9,295 \n  (7,108) \n\nStock-based compensation\n\n  218 \n  216 \n  2 \n\nTotal\n\n  2,405 \n  9,511 \n  (7,106) \n\n1Total third-party research and development expenses are calculated before salaries and benefits, depreciation, write-off of equipment and stock-based compensation.\n\n \n\nTotal research and development expenses for the year\nended March 31, 2026 were $2,405, compared to $9,511 for the year ended March\n31, 2025. This decrease of $7,106 was primarily due to the decrease in research\nactivities for GTx-104 of $7,542 driven by the close-out of the GTx-104 pivotal\nPhase 3 safety clinical trial during the first calendar quarter of 2026 offset\nby a $436 increase in external consulting and data management costs incurred in\nsupport of the NDA of GTx-104 which was submitted to the FDA in June 2025.\n\n \n\nSalaries and benefits of $1,249 for the year ended March 31, 2026 increased by $440 compared to $809 for the year ended March 31, 2025. The increase was primarily due to salary and bonus increases of $350 as well as increased benefits costs of $55.\n\n \n\nStock-based compensation of $218 for the year ended March 31, 2026, increased by $2 compared to $216 for the year ended March 31, 2025.\n\n \n\nGeneral and administrative expenses\n\n \n\nGeneral and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, legal, and support functions, including professional fees for auditing, tax, legal, consulting, rent and utilities and insurance.\n\n \n\n             \n\n**General and administrative\nexpenses**\n\n    \n    \n    \n\n \n\n      Year ended    \n\n \n\n \n  \n\nMarch\n31, 2026\n\n \n  \n\nMarch\n31, 2025\n\n \n  \n\nIncrease\n(Decrease)\n\n \n\n \n  $  \n  $  \n  $  \n\n \n  \n\n(in\nthousands)\n\n \n\nProfessional\nfees\n\n  4,254 \n  3,455 \n  799 \n\nSalaries and\nbenefits\n\n  1,780 \n  2,031 \n  (251) \n\nOther\n\n  2,051 \n  1,161 \n  890 \n\nGeneral and administrative expense before stock-based compensation and\ndepreciation1\n\n  8,085 \n  6,647 \n  1,438 \n\nStock-based\ncompensation\n\n  580 \n  514 \n  66 \n\nDepreciation\nand loss on disposal\n\n  7 \n  7 \n  \n—\n\n \n\n**Total**\n\n  8,672 \n  7,168 \n  1,504 \n\n1 General and administrative sub-total expenses are calculated before stock-based compensation and depreciation.\n\n \n\n63\n\n*Table of Contents*\n\nGeneral and\nadministrative expenses were $8,672 for the year ended March 31, 2026, an\nincrease of $1,504 from $7,168 for the year ended March 31, 2025. The increase\nwas primarily driven by  $799 in\nnon-recurring legal and due diligence costs incurred in connection with\nstrategic initiatives evaluated during the period, as well as increased professional\nfees and other general and administrative costs of $890 primarily related to\npre-commercial planning for GTx-104, offset in part by a decrease in salaries\nand benefits of $251 primarily a result of decreased headcount. Stock-based\ncompensation of $580 for the year ended March 31, 2026, decreased by $66\ncompared to $514 for the year ended March 31, 2025. The increase was primarily\ndue to more stock option awards granted during the year ended March 31, 2026.\n\n \n\nChange in fair value of derivative warrant liabilities\n\n \n\nThe decrease in the fair value of derivative warrant\nliabilities for the year ended March 31, 2026 of $2,318 was mainly attributable\nto the settlement of the warrant liability as the 2023 Common Warrants (defined\nbelow) expired on October 21, 2025, which was the 60th day after the\ndate of the acceptance by the FDA of the NDA for our product candidate GTx-104.\n\n \n\nInterest income\n\n \n\nInterest and other income, net was $685 for the year ended March 31, 2026, compared to $711 for the year ended March 31, 2025. The $26 decrease in our interest and other income was due to a decrease in interest rates.\n\n \n\nIncome tax benefit\n\n \n\nIncome tax\nbenefit was $1,700 for the year ended March 31, 2026, compared to $3,199 for\nthe year ended March 31, 2025, reflecting a decrease of $1,499. The decrease\nprimarily resulted from updated drug commercialization timelines, which reduced\nthe projected future tax liability and generated a corresponding income tax\nbenefit of the same amount.  \n\n \n\nLiquidity and Capital Resources\n\n \n\nCash flows and financial condition for the years ended March 31, 2026 and March 31, 2025\n\n \n\nSummary\n\n \n\nAs of March 31, 2026, cash and cash equivalents were $16,977, a net decrease of $5,156 compared to cash and cash equivalents of $22,133 at March 31, 2025.\n\n \n\nIn February 2025, we completed a private placement of our securities with certain institutional and accredited investors. Net proceeds to us were $13,705. Refer to Note 7, Stockholders’ Equity - 2025 Private Placement in the accompanying consolidated financial statements elsewhere in this document for additional information. We believe our existing cash and cash equivalents will be sufficient to sustain planned operations through at least 12 months from the issuance date of the consolidated financial statements included with this Annual Report on Form 10-K.\n\n \n\nWe will require additional capital to fund our daily operating needs beyond that time. We do not expect to generate revenue from product sales unless and until we successfully complete drug development and obtain regulatory approval, which is subject to significant uncertainty. To date, we have financed our operations primarily through public offerings and private placements of our common equity, warrants and convertible debt and the proceeds from research tax credits. Until such time that we can generate significant revenue from drug product sales, if ever, we will require additional financing, which is expected to be sourced from a combination of public or private equity or debt financing or other non-dilutive sources, including fees, milestone payments and royalties from collaborations with third parties. Arrangements with collaborators or others may require us to relinquish certain rights related to our technologies or drug product candidates. Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategy. We plan to raise additional capital in order to maintain adequate liquidity. Negative results from studies or trials, if any, or depressed prices of our Common Stock could impact our ability to raise additional financing. Raising additional equity capital is subject to market conditions that are not within our control.\n\n \n\nNet cash used in operating activities\n\n \n\n64\n\n*Table of Contents*\n\n \n\nNet cash used\nin operating activities for the year ended March 31, 2026 was $8,869, compared\nto $14,904 for the year ended March 31, 2025, a decrease of $6,035. The\ndecrease in net cash used in operating activities was primarily due to a $7,106\ndecrease in research and development activities due to the completion of our\nGTx-104 pivotal Phase 3 STRIVE-ON trial in the first fiscal quarter of 2026,\npartially offset by a $1,504 increase in general and administrative expenses\nfor legal, consulting and other professional fees.\n\n \n\nNet cash provided by investing activities\n\n \n\nNet cash used in investing activities\nfor the year ended March 31, 2025, was $0 due to our purchase of short-term\ninvestments of $15 and maturity of short-term investments of $15. There were no\ninvesting activities for the year ended March 31, 2026.\n\n \n\nNet cash provided by financing activities\n\n \n\nNet cash\nprovided by financing activities for the year ended March 31, 2026 was $3,713,\ncompared to $14,032 for the year ended March 31, 2025, a decrease of $10,319.\nThe net cash provided by financing activities for the year ended March 31,\n2026, was attributable to the $4,040 net proceeds received from the exercise of\nthe 2023 Common Warrants offset by payment of stock issuance costs $327 from\nthe 2023 Private Placement (defined below) which occurred in September 2023.\nNet cash provided by financing activities of $14,032 for the year ended March\n31, 2025, was primarily attributable to the $14,999 gross proceeds received\nfrom the 2025 Private Placement (defined below) which occurred in February\n2025, offset by stock issuance costs of $967.\n\n \n\n2025 Private Placement\n\n \n\nIn February 2025, we agreed to offer\nand sell in a private placement (the “2025 Private Placement”) an aggregate of\n3,252,132 shares of Common Stock, at a purchase price of $3.395 per share of\nCommon Stock (the “2025 Private Placement Shares”), and pre-funded warrants to\npurchase up to 1,166,160 shares of Common Stock, at a purchase price equal to\nthe purchase price per 2025 Private Placement Share less $0.0001 (the “2025\nPre-Funded Warrants”). Each 2025 Pre-Funded Warrant is exercisable for one\nshare of Common Stock at an exercise price of $0.0001 per share, is exercisable\nimmediately and will expire once exercised in full. For each 2025 Private\nPlacement Share and 2025 Pre-Funded Warrant issued, we agreed to issue to each\npurchaser an accompanying warrant to purchase shares of Common Stock (or 2025\nPre-Funded Warrants in lieu thereof), exercisable for an aggregate of 4,418,292\nshares of Common Stock (or 2025 Pre-Funded Warrants in lieu thereof) (the “2025\nCommon Warrants”). Each 2025 Common Warrant is exercisable for one share of\nCommon Stock at an exercise price of $3.395 per share, is immediately\nexercisable and will expire on the earlier of (i) the 60th day after the date\nthe FDA approves the NDA for GTx-104 and (ii) September 25, 2028. The 2025\nPrivate Placement closed on February 11, 2025. The net proceeds to us from the\n2025 Private Placement were $13,705, after deducting fees and expenses.\n\n \n\n2023 Private Placement\n\n \n\nIn September 2023, we entered into a\nsecurities purchase agreement (the “Purchase Agreement”) with certain\ninstitutional and accredited investors in connection with a private placement\noffering of our securities (the “2023 Private Placement”). Pursuant to the\nPurchase Agreement, we sold 1,951,371 Common Shares, at a purchase price of\n$1.848 per Common Share and pre-funded warrants (the “2023 Pre-Funded\nWarrants”) to purchase up to 2,106,853 Common Shares at a purchase price equal\nto the purchase price per Common Share less $0.0001. Each 2023 Pre-Funded\nWarrant is exercisable for one Common Share at an exercise price of $0.0001 per\nCommon Share, is immediately exercisable, and will expire once exercised in\nfull. Pursuant to the Purchase Agreement, we also issued to such institutional\nand accredited investors common warrants (the “2023 Common Warrants”) to\npurchase Common Shares, exercisable for an aggregate of 2,536,391 Common\nShares. Under the terms of the Purchase Agreement, for each Common Share and\neach 2023 Pre-Funded Warrant issued in the 2023 Private Placement, an\naccompanying five-eighths (0.625) of a Common Warrant was issued to the\npurchaser thereof. Each whole Common Warrant was exercisable for one Common\nShare at an exercise price of $3.003 per Common Share, was immediately\nexercisable, and would expire on the earlier of (i) the 60th day after the date\nof the acceptance by the FDA of an NDA for our product candidate GTx-104 and\n(ii) five years from the date of issuance. The 2023 Private Placement closed on\nSeptember 25, 2023. The net proceeds to us from the 2023 Private Placement were\n$7,338, after deducting fees and expenses. In October 2025, we received $4,040\nin net proceeds from exercises of 1,345,464 2023 Common Warrants that were\nissued in the 2023 Private Placement. for 1,345,464 shares of Common Stock. The\nremaining 1,190,927 2023 Common Warrants issued in the 2023 Private Placement\nexpired on October 21, 2025, in accordance with their terms as the 60th day\nafter the FDA’s acceptance for review of our NDA for GTx-104 had passed.\n\n \n\nContractual Obligations and Commitments\n\n \n\nOur contractual obligations and commitments primarily include trade payables, CMO and CRO agreements.\n\n \n\nResearch and development contracts and contract research organizations agreements\n\n \n\nWe utilize CMOs, for the development and production of clinical materials and CROs to perform services related to our clinical trials. Pursuant to the agreements with CMOs and CROs, we have either the right to terminate the agreements without penalties or under certain penalty conditions. As of March 31, 2026, we had $95 of commitments to CMOs and $28 of commitments to CROs for the next twelve months.\n\n \n\n65\n\n*Table of Contents*\n\nContingencies\n\n \n\nWe evaluate contingencies on an ongoing basis and establish loss provisions for matters in which losses are probable, and the amount of the loss can be reasonably estimated.\n\n \n\nUse of Estimates and Measurement of Uncertainty\n\n \n\nThe preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.\n\n \n\nEstimates are based on management’s best knowledge of current events and actions that management may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.\n\n \n\nEstimates and assumptions include the measurement of stock-based compensation, derivative warrant liabilities, accruals for research and development contracts and contract organization agreements, and valuation of intangibles and goodwill. Estimates and assumptions are also involved in determining which research and development expenses qualify for research and development tax credits and in what amounts. We recognize the tax credits once we have reasonable assurance that they will be realized.\n\n \n\nWhile our significant accounting policies are described in the notes to our financial statements, we believe that the following critical accounting policies are most important for understanding and evaluating our reported financial results, as these policies relate to the more significant areas involving management’s judgments and estimates.\n\n \n\nCritical Accounting Policies\n\n \n\nResearch and development costs\n\n \n\nResearch\nand developments expenditures are expensed as incurred. These costs consist of\nemployees’ salaries and benefits related to research and development\nactivities, contractors and consultants that conduct our clinical trials,\nlaboratory material and small equipment, clinical trial materials, stock-based\ncompensation expense, and other non-clinical costs and regulatory fees. We\naccrue research and development expenses based on work performed, which relies\non estimates of total costs incurred based on patient enrollment and completion\nof patient studies, invoices received and contracted costs. Advance\npayments for goods and services that will be used in future research and\ndevelopment are recognized in prepaids or other assets and are expensed when\nthe services are performed, or the goods are used.\n\n \n\nValuation of Intangible Assets and Goodwill\n\n \n\nIn a business combination, the fair value of in-process research and development (\"IPR&D\") assets acquired is capitalized and accounted for as indefinite-lived intangible assets, and not amortized until the underlying project receives regulatory approval, at which point the intangible assets will be accounted for as definite-lived intangible assets or discontinued. If discontinued, the intangible assets will be written off. R&D costs incurred after the acquisition are expensed as incurred.\n\n \n\nOur IPR&D and goodwill was $49,300\nas of March 31, 2026, which represents 74% of total assets. Goodwill and\nindefinite lived assets are not amortized but are subject to an impairment\nreview annually and more frequently when indicators of impairment exist. An\nimpairment of goodwill could occur if the carrying amount of a reporting unit\nexceeds the fair value of that reporting unit. An impairment of\nindefinite-lived intangible assets would occur if the fair value of the\nintangible asset is less than the carrying value.\n\n \n\nThe nature of the assumptions in the intangible assets’ impairment tests are considered critical due to a high level of subjectivity and judgment necessary to account for highly uncertain matters, and the impact of the assumptions on our financial condition and our operating performance could be material.\n\n \n\nWe test goodwill for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value is less than its carrying amount. If we conclude it is more likely than not that fair value of the reporting unit is less than its carrying amount, a quantitative impairment test is performed. We test indefinite lived intangible assets for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value is less than its carrying amount. Events that could result in an impairment, or trigger an interim impairment assessment, include the decision to discontinue the development of a drug, the receipt of additional clinical or nonclinical data regarding our drug candidates or a potentially competitive drug candidates, changes in the clinical development program for a drug candidate, or new information regarding potential sales for the drug candidates and increases in our weighted average cost of capital.\n\n \n\nIndividual IPR&D projects and goodwill are tested for impairment on an annual basis in the fourth quarter, and in between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of each technology or our reporting unit below its carrying value. No impairment of the identified intangible assets was recognized for the years ended March 31, 2026 and 2025.\n\n \n\n66\n\n*Table of Contents*\n\nFinancial Instruments\n\n \n\nCredit Risk\n\n \n\nFinancial instruments that potentially subject us to a concentration of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents are all invested in accordance with our investment policy with the primary objective being the preservation of capital and the maintenance of liquidity, which risk is managed by dealing only with highly rated U.S. and Canadian institutions. We maintain our cash and cash equivalents at accredited financial institutions in amounts that exceed federally insured limits. We do not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.\n\n \n\nInterest Rate Risk\n\n \n\nInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market rates. Our exposure to interest rate risk as of March 31, 2026, was as follows:\n\n \n\n  \n\nCash and cash equivalents\n\nShort-term fixed interest rate\n\n \n\nOur capacity to reinvest the short-term amounts with equivalent return will be impacted by variations in short-term fixed interest rates available on the market. Management believes the risk we will realize a loss as a result of the decline in the fair value of our short-term investments is limited because these investments have short-term maturities and are held to maturity.\n\n \n\nOur contractual obligations related to financial instruments and other obligations and liquidity resources are presented in the liquidity and capital resources of this MD&A.\n\n \n\nWe expect to incur significant expenses and continued operating losses for the foreseeable future. We expect our expenses will increase substantially in connection with our ongoing activities, particularly as we advance clinical development for our drug candidates in our pipeline; continue to engage contract manufacturing organizations to manufacture our clinical study materials and to ultimately develop large-scale manufacturing capabilities in preparation for commercial launch; seek regulatory approval for our drug candidates; and add personnel to support our drug product development and future drug product launch and commercialization.\n\n \n\n67\n\n*Table of Contents*\n\nWe believe our\nexisting cash and cash equivalents will be sufficient to sustain planned\noperations through at least 12 months from the issuance date of the\nconsolidated financial statements included with this Annual Report on Form\n10-K.  We require additional capital to\nfund our daily operating needs beyond that time. We plan to raise additional\ncapital prior to that time in order to maintain adequate liquidity. The\ndeficiencies identified in the CRL, negative results from studies, if any, and\ndepressed prices of our common stock could impact our ability to raise\nadditional financing. Raising additional equity capital is subject to market\nconditions not within our control. If we do not raise additional funds in this\ntime period, we may not be able to realize our assets and discharge our\nliabilities in the normal course of business.\n\n \n\nRecent Accounting Pronouncements\n\n \n\nIn November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”), to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization and depletion) in commonly presented expense captions (such as cost of sales, SG&A and research and development).\n\n \n\nASU\n2024-03 applies to all public business entities and is effective for annual\nreporting periods beginning after December 15, 2026 and interim reporting\nperiods within annual reporting periods beginning after December 15, 2027. The\nrequirements will be applied prospectively with the option for retrospective\napplication. Early adoption is permitted. We are currently evaluating the\neffect of adopting this new guidance on our consolidated financial statements\nand disclosures.\n\n \n\nWe have considered recent accounting pronouncements and concluded that they are either not applicable to our business or that the effect is not expected to be material to our consolidated financial statements as a result of future adoption.\n\n \n\n68\n\n*Table of Contents*"}