# LIGHTBRIDGE Corp: Form 10-Q for the period ended Mar 31, 2020

- Company: [LIGHTBRIDGE Corp](/companies/ltbr.md) (CIK 1084554)
- Form: 10-Q
- Filed: 2020-05-14
- Accepted by EDGAR: May 14, 2020, 17:01 ET
- Period: 2020-03-31
- Accession: 0001477932-20-002678
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1084554/000147793220002678/ltbr_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1084554/000147793220002678/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2020-01-01 to 2020-03-31 | $389.8k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2020-01-01 to 2020-03-31 | −$2.3m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2020-01-01 to 2020-03-31 | −$2.3m | us-gaap:NetIncomeLoss |
| Diluted shares (weighted) | 3 months, 2020-01-01 to 2020-03-31 | 3,294,998 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2020-01-01 to 2020-03-31 | −$2.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2020-03-31 | $16.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2020-03-31 | $16.7m | us-gaap:AssetsCurrent |
| Total assets | at 2020-03-31 | $18.5m | us-gaap:Assets |
| Current liabilities | at 2020-03-31 | $485.7k | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2020-03-31 | $18.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 30,661 characters.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is intended to help the reader understand Lightbridge Corporation, our operations and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes thereto contained in Part I, Item 1 of this report.

This MD&A consists of the following sections:

- Overview of Our Business and recent developments — a general overview of our business and updates;
- Critical Accounting Policies and Estimates — a discussion of accounting policies that require critical judgments and estimates;
- Operations Review — an analysis of our condensed consolidated results of operations for the periods presented in our condensed consolidated financial statements; and
- Liquidity, Capital Resources, and Financial Position — an analysis of our cash flows, and an overview of our financial position.

As discussed in more detail under “Forward-Looking Statements” immediately preceding this MD&A, the following discussion contains forward-looking statements that involve risks, uncertainties, and assumptions such as statements of our plans, objectives, expectations, and intentions. Our actual results may differ materially from those discussed in these forward-looking statements because of the risks and uncertainties inherent in future events.

### OVERVIEW OF OUR BUSINESS

When used in this Quarterly Report on Form 10-Q, the terms “Lightbridge”, the “Company”, “we”, “our”, and “us” refer to Lightbridge Corporation together with its wholly-owned subsidiaries Lightbridge International Holding LLC and Thorium Power Inc.

### Overview

We are an innovative nuclear fuel technology company. Our goal is to develop and commercialize the next generation of nuclear fuel that could significantly improve the economics, safety, and proliferation resistance of nuclear fuel in existing and new nuclear reactors, large and small, with a meaningful impact on addressing climate change, air pollution and benefiting national security. We project that the world’s energy and climate needs can only be met if nuclear power’s share of the energy-generating mix grows substantially.

We believe our metallic fuel offers significant economic and safety benefits over traditional fuel, primarily because of the superior heat transfer properties of all-metal fuel and the resulting lower operating temperature of the fuel. We also believe that uprating a reactor with Lightbridge Fuel™ will add incremental electricity at a lower levelized cost than any other means of generating baseload electric power, including any renewable, fossil, or hydroelectric energy source, or with any other nuclear fuel.

We have built a significant portfolio of patents reflecting years of research and development, and we anticipate substantial completion of our research efforts in the coming years and the testing of our fuel through third party vendors and others, including the United States Department of Energy National Laboratories.

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### Our Nuclear Fuel

Since 2008, we have been engaged in the design and development of proprietary, innovative nuclear fuels to improve the cost competitiveness, safety, proliferation resistance and performance of nuclear power generation. In 2010, we announced the concept of all-metal fuel (i.e., non-oxide fuel) for currently operating as well as new-build reactors. Our focus on metallic fuel is based on listening to the voices of prospective customers, as nuclear utilities have expressed interest in the improved economics and enhanced safety that we believe metallic fuel will provide.

The fuel in a nuclear reactor generates heat energy. That heat is then converted through steam into electricity that is sold. We have designed our innovative, proprietary metallic fuels to be capable of significantly higher burnup and power density compared to conventional oxide nuclear fuels. Burnup is the total amount of electricity generated per unit mass of nuclear fuel and is a function of the power density of a nuclear fuel and the amount of time the fuel operates in the reactor. Power density is the amount of heat power generated per unit volume of nuclear fuel. Conventional oxide fuel used in existing commercial reactors is nearing the limit of its burnup and power density capability. As a result, further optimization to increase power output from the same core size and improve the economics and safety of nuclear power generation using conventional oxide fuel technologies is limited. A new fuel is needed to bring enhanced performance to reactors; we are developing that new fuel.

As the nuclear industry prepares to meet the increasing global demand for electricity production, longer operating cycles and higher reactor power outputs have become a much sought-after solution for the current and future reactor fleet. We believe our proprietary nuclear fuel designs have the potential to improve the nuclear power industry’s economics by:

- providing an increase in power output of potentially up to 10% while simultaneously extending the operating cycle length from 18 to 24 months in existing pressurized water reactors (PWRs), including in Westinghouse-type four-loop PWR plants which are currently constrained to an 18-month operating cycle by oxide fuel enriched up to 5%, or increasing the power potentially up to 17% while retaining an 18-month operating cycle; and
- enabling increased reactor power output via a power uprate (potentially up to a 30% increase) or a longer operating cycle (instead of a power uprate) without changing the core size in new build PWRs.

We believe our fuel designs will allow current and new build nuclear reactors to safely increase power production and reduce operations and maintenance costs on a per kilowatt-hour basis. New build nuclear reactors could also benefit from the reduced upfront capital investment per kilowatt of generating capacity in the case of implementing a power uprate. In addition to projected electricity production cost savings, we believe our technology can result in utilities or countries needing to deploy fewer new reactors to generate the same amount of electricity (in the case of a power uprate), resulting in significant capital cost savings. For utilities or countries that already have operating reactors, our technology could be utilized to both increase the power output of those reactors as well as enable them to load follow with electric grid demands, which have become increasingly variable with large additions of intermittent renewable generation.

### Nuclear Power as Clean and Low Carbon Emissions Energy Source

Nuclear power provides clean, reliable baseload electricity. According to the World Nuclear Association (WNA), nuclear power plants produce no greenhouse gas emissions during operation, and over the course of its lifecycle, nuclear produces about the same amount of CO2 equivalent emissions per unit of electricity as wind. The WNA further notes that almost all proposed pathways to achieving significant decarbonization suggest an increased role for nuclear power, including those published by the International Energy Agency, Massachusetts Institute of Technology Energy Initiative, US Energy Information Administration, and World Energy Council.

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We believe that deep cuts to CO2 emissions are only possible with electrification of most of the transportation and industrial sectors globally and powering them and the current electricity needs of the world with non-emitting or low-emitting power. We believe this can be done only with a large increase in nuclear power, several times the amount that is generated globally today. We believe that our nuclear fuel technology will be an essential element of reaching this goal.

### Development of Lightbridge Fuel™

### Recent Developments

- Entered into a Cooperative Research and Development Agreement (CRADA) on April 22, 2020 with Battelle Energy Alliance, LLC, the operating contractor of INL, in collaboration with DOE. Signing the CRADA was the last step in the contracting process to formalize a voucher award from the U.S. Department of Energy’s (DOE) Gateway for Accelerated Innovation in Nuclear (GAIN) program. The scope of the project includes experiment design for irradiation of Lightbridge metallic fuel material samples in the Advanced Test Reactor (ATR) at INL. The project is anticipated to commence in the second quarter of 2020. The total project value is approximately $846,000, with three-quarters of this amount funded by DOE for the scope performed by INL.

### Future Steps Toward the Development and Sale of Nuclear Fuel Assemblies

We anticipate near-term fuel development milestones for Lightbridge Fuel™ over the next 12-24 months will consist of the following:

- Complete the scope of work relating to the recent GAIN Voucher award in collaboration with Idaho National Laboratory;
- Enter into an agreement to manufacture our nuclear fuel material samples for test reactor irradiation;
- Begin the initial demonstration of our manufacturing technology using depleted or natural uranium, and
- Evaluation of our fuel for use in the CANDU reactor market.

The long-term milestones towards development and sale of nuclear fuel assemblies include, among other things, irradiating material samples and/or prototype fuel rods in test reactors, conducting post-irradiation examination of irradiated material samples and/or prototype fuel rods, performing thermal-hydraulic experiments, performing seismic and other out-of-reactor experiments, entering into a lead test rod/assembly agreement with a host reactor, demonstrating the production of lead test rods and/or lead test assemblies at a pilot-scale fuel fabrication facility and demonstrating the operation of lead test rods and/or lead test assemblies in commercial reactors. There are inherent uncertainties in the cost and outcomes of the many steps needed for successful deployment of our fuel in commercial nuclear reactors, which makes it difficult to predict the timing of the commercialization of our nuclear fuel technology with any accuracy. Accordingly, based on our anticipated schedule, we expect to begin receiving purchase orders for initial reload batches from utilities in about 8 to 10 years, with final qualification (i.e., deployment of fuel in the first reload batch) in a commercial reactor taking place approximately two years thereafter. We will continue to seek development funding contributions or other financing arrangements with utilities and the DOE.

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### Impact of COVID-19 to our Business

The recent COVID-19 pandemic has impacted our business operations and results of operations for the first quarter of 2020, resulting in the reduction of our research and development expenses and an increase in our general and administrative expenses due to severance payments made to former employees, as described in more detail under “Condensed Consolidated Results of Operations – Three Months Ended March 31, 2020 and 2019”, below. The future impacts of the global emergence of COVID-19 on our financial position, results of operations and future liquidity and capital resources availability is unknown and uncertain.

In an effort to protect the health and safety of our employees, we took proactive, aggressive action from the earliest signs of the outbreak in China including working from home and suspending employee travel. In an effort to contain COVID-19 or slow its spread, governments around the world have also enacted various measures, including orders to close all businesses not deemed "essential," isolate residents to their homes or places of residence, and practice social distancing when engaging in essential activities.

We will continue to actively monitor the COVID-19 situation and may take further actions altering our business operations that we determine are in the best interests of our employees and stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential effects any such alterations or modifications may have on our financial position, results of operations or liquidity, including the effects on our employees and future prospects, including our research and development activities for the remainder of fiscal 2020 and beyond.

### Filing of Arbitration – Framatome

On February 7, 2020, we filed a request for arbitration (the “Arbitration Request”) in the International Court of Arbitration of the International Chamber of Commerce against Framatome, seeking to obtain, inter alia, a declaration that the R&D Services Agreement, dated November 14, 2017, by and among Framatome, Enfission, and the Company (as amended by Amendment Number One, dated January 25, 2018, and Amendment Number Two, dated June 20, 2018, the “RDSA”) was validly terminated and is no longer in force, and to obtain compensation for the damages incurred. We anticipate our legal costs may increase in 2020 due to this action.

See Part II. Item 1. Legal Proceedings, for more information.

### Certain Challenges

Please see Part I, Item 1, “Description of Business—Certain Challenges” and Item 1A. *Risk Factors* in this report and the Annual Report on Form 10-K for a discussion of certain risks and challenges that may delay or impair the development of Lightbridge Fuel™ including without limitation the availability of financing, events related to the dissolution of our joint venture with Framatome, and the many risks inherent in developing a new type of nuclear fuel.

### CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make a variety of estimates and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and (ii) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements. For a discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our financial statements, please see “Critical Accounting Policies and Estimates” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed on March 18, 2020. There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2020.

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Our management expects to make judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increase, these judgments become even more subjective and complex. Although we believe that our estimates and assumptions are reasonable, actual results may differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may have a material impact on our results of operations and/or financial condition.

### Recent Accounting Standards and Pronouncements

Refer to Note 1 of the Notes to our unaudited condensed consolidated financial statements for a discussion of recent accounting standards and pronouncements.

### OPERATIONS REVIEW

Financial information is included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Our goal is to develop and commercialize innovative, proprietary nuclear fuel designs, which we expect will significantly enhance the nuclear power industry’s economics due to higher power output and improved safety margins.

Our metallic fuel can be used in different types of water-cooled commercial power reactors, such as pressurized water reactors, boiling water reactors, Russian-type VVER reactors, CANDU heavy water reactors, water-cooled small modular reactors, as well as water-cooled research reactors.

We have obtained patent validation in key countries and will continue to seek patent validation in key countries that either currently operate or are expected to build and operate a large number of suitable nuclear power reactors.

We currently expect to invest a total of $1 million to $1.5 million in the development of our nuclear fuel products, including corporate research and development expenditures, over the next 12 to 15 months.

### Condensed Consolidated Results of Operations – Three Months Ended March 31, 2020 and 2019

The following table presents our historical operating results and the increase (decrease) in amounts for the periods indicated:

| Operating Expenses | Three Months Ended March 31, 2020 | 2019 | Increase (Decrease) Change $ | Increase (Decrease) Change % |
| --- | ---: | ---: | ---: | ---: |
| General and administrative | $1,936,755 | $1,357,762 | $578,993 | 43% |
| Research and development expenses | $389,824 | $922,235 | $(532,411) | -58% |
| Total Operating Expenses | $2,326,579 | $2,279,997 | $46,582 | 2% |
| **Other Operating Income and (Loss)** |  |  |  |  |
| Other income from joint venture | $— | $355,281 | $(355,281) | -100% |
| Equity in loss from joint venture | $— | $(1,295,032) | $1,295,032 | 100% |
| **Total Other Operating Income (Loss)** | $— | $(939,751) | $939,751 | 100% |
| **Total Operating Loss** | $(2,326,579) | $(3,219,748) | $(893,169) | -28% |
| **Other Income** | $62,493 | $109,221 | $(46,728) | -43% |
| **Net loss before Income Taxes** | $(2,264,086) | $(3,110,527) | $(846,441) | -27% |
| **Net Loss** | $(2,264,086) | $(3,110,527) | $(846,441) | -27% |

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### Operating Expenses

### General and Administrative Expenses

General and administrative expenses consist mostly of compensation and related costs for personnel and facilities, stock-based compensation, finance, human resources, information technology, and fees for consulting and other professional services. Professional services are principally comprised of legal, audit, strategic advisory services, and outsourcing services.

Total general and administrative expenses increased by approximately $0.6 million for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019. There was an increase in professional fees of approximately $0.4 million primarily due to legal fees relating to the Framatome arbitration, accounting fees and other professional fees, an increase in employee compensation and employee benefits of approximately $0.1 million and an increase in severance payments of $0.2 million, employee layoffs partially due to the uncertainty of COVID-19 on our future business operations and the cessation of the Enfission joint venture, as discussed above. These increases were offset by a decrease in stock-based compensation of approximately $0.1 million, due to the decrease in stock option expense for prior stock option awards that have become fully vested in prior reporting periods. Total stock-based compensation included in general and administrative expenses was approximately $0 and $0.1 million for the three months ended March 31, 2020 and 2019, respectively. For the remainder of 2020, we anticipate a decrease in general and administrative expenses due to reduced discretionary spending, reduced consulting fees and reduced payroll and related benefit costs.

See Note 7. Stockholders’ Equity and Stock-Based Compensation of the Notes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information regarding our stock-based compensation.

### Research and Development

Research and development expenses in 2020 and 2019 consist primarily of employee compensation and related fringe benefits including stock-based compensation, and consulting fees, including work performed and billed to our Enfission joint venture in 2019.

Total research and development expenses decreased by approximately $0.5 million for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, due to the decrease in work for Enfission and the continuing work on developing a new fuel development strategy after Enfission. There was a decrease in professional fees of approximately $0.2 million, a decrease in consulting fees of approximately $0.1 million, and a decrease in stock-based compensation of approximately $0.2 million, due to the decrease in stock option expense for prior stock option awards that had vested. Total stock-based compensation included in research and development expenses was approximately $0 and $0.2 million for the three months ended March 31, 2020 and 2019, respectively.

Due to the nature of our research and development expenditures, cost and schedule estimates are inherently uncertain and can vary significantly as new information and the outcome of these research and development activities become available. For 2020, we anticipate a significant decrease in research and development expense compared to 2019, partially due to the uncertainty of COVID-19 on our future business operations, resulting in budgetary constraints due primarily to current market conditions and the uncertainty of future liquidity and capital resources available to us to conduct our future research and development activities.

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### Other Operating Income and (Loss) – Related Party

Reported in other operating income and (loss) is other income for activities performed by our employees and consultants billed to the Enfission joint venture for research and development work and our share of the allocated loss in Enfission. Total other operating income and (loss) decreased by approximately $0.9 million for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019.

Other income from the Enfission joint venture for the three months ended March 31, 2020 and 2019 was approximately $0 and $0.4 million, respectively. Equity in loss from the Enfission joint venture for the three months ended March 31, 2020 and 2019 was $0 and $1.3 million, respectively, which consists of our share of the allocated loss in Enfission. During the three months ended March 31, 2020, the Company did not provide additional equity contributions or share any loss in Enfission. The Company had not separately guaranteed any obligations of Enfission at March 31, 2020 and December 31, 2019 and is not obligated under the joint venture operating agreement to fund its deficit capital account balance in Enfission to pay for any liabilities incurred by Enfission and therefore did not record its share of losses in Enfission at March 31, 2020 and December 31, 2019.

### Other Income

There was a net decrease in other income of approximately $0.1 million. This change was due to a decrease of $0.1 million in interest income generated from the interest earned from the purchase of treasury bills and from our bank savings account for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019.

### Provision for Income Taxes

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company is currently evaluating the impact of the CARES Act, but at present does not expect that the NOL carryback provision of the CARES Act would result in a material cash benefit to us. We incurred a pre-tax net loss for both 2020 and 2019. We reviewed all sources of income for purposes of recognizing the deferred tax assets and concluded a full valuation allowance for 2020 and 2019 was necessary. Therefore, we did not have a provision for taxes for the three months ended March 31, 2020 and 2019.

### LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION

### Liquidity outlook

We believe we will have adequate liquidity over the next 12 months to operate our business and meet our current cash requirements. We reduced our 2020 and 2021 operating budgets for discretionary spending, revised our research and development strategy to reduce current R&D costs and reduced payroll and payroll related benefit costs through employee layoffs, the transition of our Executive Chairman of the Board of Directors to a non-executive role, and the conversion of some employees to consultants. As of the date of this filing, we had cash and cash equivalents totaling approximately $15.4 million. While the impact and duration of COVID-19 on our business activities in the future is currently uncertain, the situation required us to reduce our operating budgets.

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At March 31, 2020, we had cash and cash equivalents of approximately $16.3 million, as compared to approximately $17.9 million at December 31, 2019, a decrease of approximately $1.6 million. A cash inflow of approximately $0.4 million resulted from net proceeds from the sale of approximately 0.1 million shares of common stock during the three months ended March 31, 2020. This cash inflow was offset by net cash used in operating activities of approximately $2.0 million. We used cash during the three months ended March 31, 2020 to fund our research and development expenses and general and administrative expenses.

We currently project a negative cash flow from operations averaging approximately $0.7 million per month for our general and administrative and research and development expenses, for total expected expenditures of approximately $8 million to $8.5 million for the next 12 to 15 months. We believe that our cash at March 31, 2020 exceeds our revised budgeted expenditures through the second quarter of 2021. However, there are inherent uncertainties in forecasting future expenditures, especially forecasting for a significantly revised level of operations and with uncertainties such as to how COVID-19 may affect costs and operations. Accordingly, the potential for budget variances in the projection of the Company’s planned operations, plus any additional expenditures that may result from unexpected developments, such as additional expenditures that might result from additional legal costs and unexpected fees relating to the arbitration with our joint venture partner. Taking into account these above uncertainties, it raises substantial doubt about the Company’s ability to continue as a going concern for the 12 months following the date of this filing.

We can provide no assurances about meeting our budgeted expenditures regarding our future research and development efforts beyond the next 12 months, as well as predicting future market trends in nuclear power that can affect the future sale of our nuclear fuel. Furthermore, any negative results from our research and development may require us to increase our research and development spending to achieve our desired milestones in developing our nuclear fuel. There can be no assurance that the Enfission arbitration will not affect our ability to continue to advance our research and development efforts. These additional capital needs relate to the development, manufacturing, and commercialization of our nuclear fuel assemblies. We have the ability to delay or reduce incurring certain operating expenses, including research and development expenses, in the next 12 to 15 months, which could reduce our cash flow shortfall, if needed.

The current primary sources of cash available to us for the next 12 months are potential funding from equity investments, including our ATM financing arrangement. The Company has an effective shelf registration statement on Form S-3 (File No. 333-223674) filed on March 15, 2018 and declared effective March 23, 2018 that will expire on March 23, 2021. Due to the offering limitations currently applicable under General Instruction I.B.6. of Form S-3 and the market valuation of our current public float, we may be limited on the amount of funding available under our existing shelf registration statement or a new shelf registration statement. We have no debt or debt credit lines and we have financed our operations to date through our prior years’ consulting revenue margins and the sale of our preferred stock and common stock. Management believes that public or private equity investments will be available in the future, however adverse market conditions in our common stock price and trading volume, as well as other factors like COVID-19 could substantially impair our ability to raise capital in the future.

### Short-Term and Long-Term Liquidity Sources

As discussed above, we may seek new financing bringing us additional sources of capital, depending on the capital market conditions of our common stock, over the next 12 months. There can be no assurance that these additional sources of capital will be made available to us. The primary potential sources of cash that may be available to us are as follows:

- Equity or debt investment from third party investors in Lightbridge; and
- Strategic investment to support the remaining research and development activities required to further enhance and complete the development of our fuel products to a commercial stage.

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In support of our long-term business with respect to our fuel technology business, we endeavor to create strategic alliances with other parties during the next three years, to support the remaining research and development activities that is required to further enhance and complete the development of our fuel products to a commercial stage. We may be unable to form such strategic alliances on terms acceptable to us or at all.

See Note 7. Stockholders’ Equity and Stock-Based Compensation of the Notes to our condensed consolidated financial statements included in Part I. Item 1. *Financial Statements,* of this this Quarterly Report on Form 10-Q for information regarding our prior financings.

### Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.

## Controls and procedures

As filed, 1,205 characters.

### Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of March 31, 2020 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the first quarter of 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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## Risk factors

As filed, 1,419 characters.

### COVID-19 OUTBREAK COULD ADVERSELY AFFECT OUR BUSINESS

The recent outbreak of COVID-19 in the United States and globally has resulted in the United States and other countries halting or sharply curtailing the movement of people, goods and services. All of this has caused extended shutdowns of businesses and the prolonged economic impact remains uncertain. At this point, we have experienced and may continue to experience a reduction of our research and development expenses and an increase in our general and administrative expenses. Other than such changes, we believe the conditions will have not a material adverse effect on our business, but given the rapidly changing developments we cannot accurately predict what effects these conditions will have on our financial position, results of operations and liquidity, including our research and development activities, which will depend on, among other factors, the ultimate geographic spread of the virus, the duration of the outbreak and travel restrictions and business closures imposed by the United States and various other governments. The coronavirus may have a material adverse effect on our ability to obtain financing, which is needed to generate sufficient cash flows to conduct our businesses activities in the future.

There have been no other material changes to our risk factors from the risk factors previously disclosed in the 2019 Annual Report.

Filed May 14, 2020.
Source: SEC EDGAR, the filing index for accession 0001477932-20-002678. Last ingested by Listed: Nov 4, 2026, 16:45 ET. No prices; not investment advice.