Liquidity, Going Concern and Other Uncertainties
|3 Months Ended|
Mar. 31, 2021
|Liquidity, Going Concern and Other Uncertainties [Abstract]|
|LIQUIDITY, GOING CONCERN AND OTHER UNCERTAINTIES||
2 — LIQUIDITY, GOING CONCERN AND OTHER UNCERTAINTIES
The unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”), which contemplate continuation of the Company as a going concern. The Company is in a development stage and has incurred losses each year since inception and has experienced negative cash flows from operations in each year since inception and has an accumulated deficit of approximately $36.4 million as of March 31, 2021. Based on the current development plans for AD04 in both the U.S. and international markets and other operating requirements, the Company does not believe that the existing cash and equivalents are sufficient to fund operations for the next twelve months following the filing of these unaudited condensed consolidated financial statements, though the Company expects cash on hand to be sufficient to fund operations into the fourth quarter of 2021. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Due to the COVID-19 pandemic, during the first three quarters of 2020, the Company experienced delays in certain countries in obtaining regulatory approval required to commence the trial in such countries, resulting in significantly slowed trial enrollment (see Other Uncertainties below). Enrollment has since improved, though enrollment in higher cost sites in Scandinavia have recovered more quickly than in lower cost sites in Central and Eastern Europe. The Company presently projects completion of its Phase 3 clinical trial near in the first quarter of 2022. There continues to be uncertainties regarding the potential impact of COVID-19 on our clinical trial and the associated cash projections. While the Company’s current estimates include the overhead costs necessary to support operations during the extended trial period and other costs increases associated with conducting trial activities impacted by the pandemic, additional delays and cost increases could add to those estimates.
While the Company’s cash on hand at the filing date is not sufficient to fund operation to database lock, the Company has an active equity purchase agreement (See Note 10) with Keystone Capital, LLC, which allows the sale of up to $15 million, which amount, if fully accessible, would be sufficient to fund the Company’s operations beyond one year from the filing date of these statements and through database lock. Under this equity purchase agreement, $2.85 million has already been raised as of this filing. However, there can be no guarantee that the Company will meet the conditions to use the equity line and without access to this credit line and/or additional funding, which may not be available on acceptable terms or at all, in which case the Company would be required to delay, scale back or eliminate some or all of its research and development programs, which would likely have a material adverse effect on the Company and its financial statements.
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.
Generally, the industry in which the Company operates subjects the Company to a number of other risks and uncertainties that can affect its operating results and financial condition. Such factors include, but are not limited to: the timing, costs and results of clinical trials and other development activities versus expectations; the ability to obtain regulatory approval to market product candidates; the ability to manufacture products successfully; competition from products sold or being developed by other companies; the price of, and demand for, Company products once approved; the ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products.
The Company also faces the ongoing risk that the coronavirus pandemic may further slow, for an unforeseeable period, the conduct of the Company’s trial. The effects of the ongoing coronavirus pandemic may also increase non-trial costs such as insurance premiums, increase the demand for and cost of capital, increase loss of work time from key personnel, and negatively impact our key clinical trial vendors and supplier of our active pharmaceutical ingredient. The full extent to which the COVID-19 pandemic impacts the clinical development of AD04, the Company’s suppliers and other commercial partners, will depend on future developments that are still highly uncertain and cannot be predicted with confidence at this time, all of which could have a material adverse effect on our business, financial condition, and results of operations.
The entire disclosure when substantial doubt is raised about the ability to continue as a going concern. Includes, but is not limited to, principal conditions or events that raised substantial doubt about the ability to continue as a going concern, management's evaluation of the significance of those conditions or events in relation to the ability to meet its obligations, and management's plans that alleviated or are intended to mitigate the conditions or events that raise substantial doubt about the ability to continue as a going concern.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef