Human management

SONNET BIOTHERAPEUTICS HOLDINGS, INC. Management report and analysis of the financial position and operating results (Form 10-K)

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is intended to help facilitate an understanding
of our financial condition and its historical results of operations for the
periods presented. This MD&A should be read in conjunction with the audited
consolidated financial statements and notes thereto included in this annual
report on Form 10-K. This MD&A may contain forward-looking statements that
involve risks and uncertainties. For a discussion on forward-looking statements,
see the information set forth above under the caption "Special Note Regarding
Forward-Looking Statements", which information is incorporated herein by
reference.



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Overview


Sonnet BioTherapeutics Holdings, Inc. ("Sonnet Holdings," "we," "us," "our" or
the "Company"), is a clinical stage, oncology-focused biotechnology company with
a proprietary platform for innovating biologic medicines of single- or
bi-specific action. Known as FHAB™ (Fully Human Albumin Binding), the technology
utilizes a fully human single chain antibody fragment that binds to and
"hitch-hikes" on human serum albumin for transport to target tissues. We
designed the construct to improve drug accumulation in specific tissues, as well
as to extend the duration of activity in the body. FHAB development candidates
are produced in a mammalian cell culture, which enables glycosylation, thereby
reducing the risk of immunogenicity. We believe our FHAB technology, for which
we received a U.S. patent in June 2021, is a distinguishing feature of our
biopharmaceutical platform that is well suited for future drug development
across a range of human disease areas, including in oncology, autoimmune,
pathogenic, inflammatory, and hematological conditions.



Our current internal pipeline development activities are focused on cytokines, a
class of cell signaling peptides that, among other important functions, serve as
potent immunomodulatory agents. Working both independently and synergistically,
specific cytokines have shown the ability to modulate the activation and
maturation of immune cells that fight cancer and pathogens. However, because
they do not preferentially accumulate in specific tissues and are quickly
eliminated from the body, the conventional approach to achieving a treatment
effect with cytokine therapy typically requires the administration of high and
frequent doses. This can result in a reduced treatment effect accompanied by the
potential for systemic toxicity, which poses challenges to the therapeutic
application of this class of drugs.



Sonnet's lead proprietary asset, SON-1010, is a fully human version of
Interleukin 12 ("IL-12"), covalently linked to the FHAB construct, for which
Sonnet intends to pursue clinical development in solid tumor indications,
including non-small cell lung cancer and head and neck cancer. Sonnet has
completed a nonhuman primate ("NHP") GLP toxicity study and has successfully
manufactured drug product for clinical use. Sonnet has submitted an
Investigational New Drug ("IND") application to the FDA and intends to submit
additional product stability data in the first quarter of 2022. Subject to FDA
approval, Sonnet is preparing to initiate a U.S. clinical trial in oncology
patients with solid tumors during the first half of 2022. Sonnet is also
preparing to initiate an Australian clinical study in healthy volunteers during
the first half of 2022. The Company acquired the global development rights to
its most advanced compound, SON-080, a fully human version of Interleukin 6
("IL-6"), in April 2020. Sonnet is advancing SON-080 in target indications of
Chemotherapy-Induced Peripheral Neuropathy ("CIPN") and Diabetic Peripheral
Neuropathy ("DPN"). Sonnet intends to file for an ex-US Phase 1b/2a pilot-scale
efficacy study with SON-080 in CIPN during the first half of 2022. This study
could yield initial top line clinical safety data during the second half of
2022. Pursuant to a license agreement the Company entered with New Life
Therapeutics Pte., Ltd ("New Life") of Singapore in May 2021, Sonnet and New
Life will be jointly responsible for developing SON-080 in DPN with the
objective of initiating an ex-US pilot-scale efficacy study in the second half
of 2022. SON-1210 (IL12-FHAB-IL15), Sonnet's lead bispecific construct, combines
FHAB with fully human IL-12 and fully human Interleukin 15 (IL-15). This
compound is being developed for solid tumor indications, including colorectal
cancer, and Sonnet expects to initiate the regulatory authorization process in
the second half of 2022. In September 2021, the Company created a wholly-owned
Australian subsidiary, SonnetBio Pty Ltd, for the purpose of conducting certain
clinical trials.



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We have incurred recurring operating losses and negative cash flows since
inception. Our ability to generate product or licensing revenue sufficient to
achieve profitability will depend heavily on the successful development and
eventual commercialization of one or more of our current or future product
candidates. Our net losses were $25.0 million and $24.3 million for the years
ended September 31, 2021 and 2020, respectively. As of September 30, 2021, the
we had cash of $27.6 million. We expect to continue to incur significant
expenses and increasing operating losses for at least the next several years. We
expect that our expenses and capital requirements will increase substantially in
connection with our ongoing activities, particularly if and as we:



  ?  conduct additional clinical trials for product candidates;

  ?  continue to discover and develop additional product candidates;

  ? acquire or in-license other product candidates and technologies;

  ? maintain, expand and protect our intellectual property portfolio;

  ? hire additional clinical, scientific and commercial personnel;

? establish a source of commercial manufacturing and secure supply chain capacity

sufficient to provide commercial quantities of any candidate product for

that we can obtain regulatory approval;

? seek regulatory approval for successful product candidates

clinical tests;

? establish a sales, marketing and distribution infrastructure to market

any product for which we can obtain regulatory approval; and

? add operational, financial and management information systems and personnel,

including staff to support the development of our products and the planned future

marketing efforts, as well as to support our activities as a public enterprise

    reporting company.




We will not generate revenue from product sales, if any, unless and until we
receive licensing revenue and/or successfully complete clinical development and
obtain regulatory approval for our product candidates. If we obtain regulatory
approval for any of our product candidates and do not enter into a
commercialization partnership, we expect to incur significant expenses related
to developing our internal commercialization capability to support product
sales, marketing and distribution. We will continue to incur significant costs
associated with operating as a public company.



As a result, we will need substantial additional funding to support our
continuing operations and pursue our growth strategy. Until such time as we can
generate significant revenue from product sales, if ever, we expect to finance
our operations through the sale of equity, debt financings or other capital
sources, which may include collaborations with other companies or other
strategic transactions. We may not be able to raise additional funds or enter
into such other agreements or arrangements when needed on favorable terms, or at
all. If we fail to raise capital or enter into such agreements as and when
needed, we may have to significantly delay, reduce or eliminate the development
and commercialization of one or more of our product candidates or delay our
pursuit of potential in-licenses or acquisitions.



Because of the numerous risks and uncertainties associated with product
development, we are unable to predict the timing or amount of increased expenses
or when or if we will be able to achieve or maintain profitability. Even if we
are able to generate product sales, we may not become profitable. If we fail to
become profitable or are unable to sustain profitability on a continuing basis,
then we may be unable to continue our operations at planned levels and be forced
to reduce or terminate operations.



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Since our inception in 2015, we have devoted substantially all of our efforts
and financial resources to organizing and staffing the Company, business
planning, raising capital, acquiring or discovering product candidates and
securing related intellectual property rights and conducting discovery, research
and development activities for product candidates. We do not have any products
approved for sale and have not generated any revenue from product sales. We have
funded our operations to date primarily with proceeds from sales of common
stock, warrants and proceeds from the issuance of convertible debt.



Recent Events


New Life Therapy License Agreement

In May 2021, we entered into a License Agreement (the "New Life Agreement") with
New Life Therapeutics PTE, LTD., a company organized under the laws of Singapore
("New Life"). Pursuant to the New Life Agreement, we granted New Life an
exclusive license (with the right to sublicense) to develop and commercialize
pharmaceutical preparations containing a specific recombinant human
interleukin-6, SON-080 (or any derivatives, fragments or conjugates thereof)
(the "Compound") (such preparations, the "Products") for the prevention,
treatment or palliation of diabetic peripheral neuropathy in humans (the "DPN
Field") in Malaysia, Singapore, Indonesia, Thailand, Philippines, Vietnam,
Brunei, Myanmar, Lao PDR and Cambodia (the "Exclusive Territory"). New Life may
exercise the option to expand (1) the field of the exclusive license to include
the prevention, treatment or palliation of chemotherapy-induced peripheral
neuropathy in humans (the "CIPN Field"), which option is non-exclusive and will
expire on December 31, 2021; and/or (2) the territorial scope of the license to
include the People's Republic of China, Hong Kong and/or India, which option is
exclusive and will also expire on December 31, 2021. We are excluded from
developing, using, selling or otherwise commercializing any Compounds or
Products for use in the DPN Field in the Exclusive Territory during the term of
the New Life Agreement.


We retain all rights to manufacture Compounds and Products anywhere in the
world. The Company and New Life shall enter into a follow-on supply agreement
pursuant to which we shall supply to New Life Products for development and
commercialization thereof in the DPN Field (and the CIPN Field, if applicable)
in the Exclusive Territory on terms to be negotiated by the parties.



Pursuant to the terms of the New Life Agreement, New Life will bear the cost of,
and be responsible for, among other things, conducting clinical studies and
additional non-clinical studies (if any, subject to both parties' approval),
preparing and filing applications for regulatory approval and undertaking other
developmental and regulatory activities for and commercializing Products in the
DPN Field (and the CIPN Field, if applicable) in the Exclusive Territory. New
Life will own and maintain all regulatory filings and approvals for Products in
the Exclusive Territory.



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The Company's obligations under the New Life Agreement include the following:
(i) License to develop, market, import, use and commercialize the Product in the
Field in the Exclusive Territory (the "License") and (ii) transfer of know-how
and clinical development and regulatory activities ("R&D Activities").



New Life paid the Company a $500,000 non-refundable upfront cash payment in
August 2020 upon executing a letter of intent to negotiate this license
agreement and a $500,000 non-refundable upfront cash payment in June 2021 in
connection with the execution of the New Life Agreement, and is obligated to pay
a deferred license fee of an additional $1,000,000 at the time of the
satisfaction of certain milestones as well as potential additional milestone
payments to us totaling up to $19,000,000 subject to the achievement of certain
development and commercialization milestones. In addition, during the Royalty
Term (as defined below), New Life is obligated to pay us tiered double digit
royalties ranging from 12% to 30% based on annual net sales of Products in the
Territory. The "Royalty Term" means, on a Product-by-Product and a
country-by-country basis in the Exclusive Territory, the period commencing on
the date of the first commercial sale (subject to certain conditions) of such
Product in such country in the Exclusive Territory and continuing until New Life
ceases commercialization of such Product in the DPN Field (or CIPN Field, if
applicable). In the event New Life (i) files for an initial public offering or
(ii) is subject to a Change of Control, the royalty obligations may be converted
to equity subject to mutual agreement of the parties.



In addition, New Life will pay us a double-digit percentage of all revenue received through the sublicensing of each Product, subject to certain exclusions.




The New Life Agreement will remain in effect on a Product-by-Product,
country-by-country basis and will expire upon the expiration of the Royalty Term
for the last-to-expire Product in the last-to-expire country, subject to (i)
each party's early termination rights including for material breach or
insolvency or bankruptcy of the other party and (ii) the Company's Buy Back
Right and New Life's Give Back Right (as defined below).



In addition, New Life granted to the Company an exclusive option to buy back the
rights granted by the Company to New Life and the Company granted New Life the
right to give back the rights with respect to Products in the DPN Field and/or
the CIPN Field (if applicable) in one or more countries in the Exclusive
Territory on terms to be agreed upon, which options will expire upon the
initiation of a Phase III Trial for the applicable Product.



COVID-19 Pandemic


In December 2019, a novel strain of coronavirus, COVID-19, was reported to have
surfaced in Wuhan, China and on March 11, 2020 was declared a pandemic by the
World Health Organization. Many countries around the world imposed quarantines
and restrictions on travel and mass gatherings to slow the spread of COVID-19
and closed non-essential businesses. As countries and state and local
jurisdictions continue to put restrictions in place, our ability to continue to
operate our business may also be limited. Such events may result in a period of
business, supply and drug product manufacturing disruption, and in reduced
operations, any of which could materially affect our business, financial
condition and results of operations.



This pandemic or outbreak could result in difficulty securing clinical trial
site locations, CROs, and/or trial monitors and other critical vendors and
consultants supporting the trial. In addition, outbreaks or the perception of an
outbreak near a clinical trial site location could impact our ability to enroll
patients. These situations, or others associated with COVID-19, could cause
delays in our clinical trial plans and could increase expected costs, all of
which could have a material adverse effect on our business and its financial
condition.



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In particular, manufacturing of our pipeline products (other than SON-1010) has
been delayed by COVID-19 related supply chain issues, specifically supply of raw
materials, including media, resins, and analytical kits, compounded by
international shipping delays. Although we do not have perfect visibility into a
resolution of the supply chain issues, we anticipate delays of approximately one
quarter to our programs for these products.



While the potential economic impact brought by, and the duration of, COVID-19
may be difficult to assess or predict, a widespread pandemic could result in
significant disruption of global financial markets, reducing our ability to
access capital, which could in the future negatively affect our liquidity. In
addition, a recession or market correction resulting from the spread of COVID-19
could materially affect our business and the value of our common shares.



The COVID-19 outbreak may also affect the ability of our staff and the parties
we work with to carry out our non-clinical, clinical, and drug manufacturing
activities. We rely or may in the future rely on clinical sites, investigators
and other study staff, consultants, independent contractors, contract research
organizations and other third-party service providers to assist us in managing,
monitoring and otherwise carrying out our nonclinical studies and clinical
trials. We also rely or may in the future rely on consultants, independent
contractors, contract manufacturing organizations, and other third-party service
providers to assist us in managing, monitoring and otherwise carrying out our
API production, formulation, and drug manufacturing activities. COVID-19 may
affect the ability of any of these external people, organizations, or companies
to devote sufficient time and resources to our programs or to travel to perform
work for us.



Potential negative impacts of the COVID-19 outbreak on the conduct of current or
future clinical studies include delays in gaining feedback from regulatory
agencies, starting new clinical studies, and recruiting subjects to studies that
are enrolling. The potential negative impacts also include inability to have
study visits at study sites, incomplete collection of safety and efficacy data,
and higher rates of drop-out of subjects from ongoing studies, delays in site
entry of study data into the data base, delays in monitoring of study data
because of restricted physical access to study sites, delays in site responses
to queries, delays in data-base lock, delays in data analyses, delays in time to
top-line data, and delays in completing study reports. New or worsening COVID-19
disruptions or restrictions could have the potential to further negatively
impact our non-clinical studies, clinical trials, and drug manufacturing
activities. At the current time, we are unable to quantify the potential effects
of this pandemic on future operations.



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Components of the results of operations



Collaboration Revenue



Collaboration revenue is currently earned from the license arrangement entered
into with New Life in May 2021, which granted New Life rights to an exclusive
license (with the right to sublicense) to develop and commercialize
pharmaceutical preparations containing a specific recombinant human
interleukin-6, SON-080 (the "Compound") (such preparations, the "Products") for
the prevention, treatment or palliation of diabetic peripheral neuropathy in
humans (the "DPN Field") in the Exclusive Territory. The Company identified the
following obligations under the arrangement: (i) License to develop, market,
import, use and commercialize the Product in the Field in the Exclusive
Territory (the "License"); and (ii) transfer of know-how and clinical
development and regulatory activities ("R&D Activities"). The Company determined
that the License and the R&D Activities are not distinct from each other and,
therefore, combined these material promises into a single performance
obligation. Under this agreement, we received upfront cash payments totaling
$1.0 million, which were fully allocated to the single performance obligation
and are being recognized over the estimated performance period of R&D services.



Operating Expenses


Research and development costs

Research and development costs consist primarily of costs incurred in the discovery and development of the Company’s product candidates. The Company charges research and development costs as they are incurred and these costs include:

? personnel costs, including salaries, stock compensation and

related benefits, for employees performing research and development functions;

? expenses incurred in the context of preclinical and clinical development

of the Company’s product candidates, including under agreements with third parties

parties, such as consultants and clinical research organizations;

? the cost of manufacturing pharmaceutical products intended for use in the Company’s preclinical trials

clinical studies and trials, including under agreements with third parties,

such as consultants and contract manufacturing organizations;

? installations, depreciation and other expenses, which include direct or earmarked expenses

    expenses for rent and maintenance of facilities and insurance;

  ? costs related to compliance with regulatory requirements; and

  ?  payments made under third-party licensing agreements.




We recognize external development costs based on an evaluation of the progress
to completion of specific tasks using information provided by our service
providers. This process involves reviewing open contracts and purchase orders,
communicating with their personnel to identify services that have been performed
on our behalf, and estimating the level of service performed and the associated
cost incurred for the service when we have not yet been invoiced or otherwise
notified of actual costs. Nonrefundable advance payments for goods or services
to be received in the future for use in research and development activities are
recorded as prepaid expenses. Such amounts are recognized as an expense when the
goods have been delivered or the services have been performed.



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Our direct research and development expenses consist primarily of external
costs, such as fees paid to outside consultants, CROs, CMOs and research
laboratories in connection with preclinical development, process development,
manufacturing and clinical development activities. Our direct research and
development expenses also include fees incurred under third-party license
agreements. We do not allocate employee costs and costs associated with
discovery efforts, laboratory supplies and facilities, including depreciation or
other indirect costs, to specific product candidates because these costs are
deployed across multiple programs and as such, are not separately classified. We
use internal resources primarily to conduct research and discovery as well as
for managing preclinical development, process development, manufacturing and
clinical development activities. These employees work across multiple programs
and therefore, we do not track costs by product candidate.



We expect our research and development expense will increase for the foreseeable
future as we attempt to advance development of our product candidates. The
successful development of our product candidates is highly uncertain. At this
time, we cannot reasonably estimate or know the nature, timing and costs of the
efforts that will be necessary to complete the remainder of the development of
our current pipeline or any future product candidates we may develop due to the
numerous risks and uncertainties associated with clinical development, including
risk and uncertainties related to:



? the timing and progress of preclinical and clinical development activities;

? the number and scope of preclinical and clinical programs that we decide to

to chase;

? our ability to maintain our current research and development programs and to

    establish new ones;

  ? establishing an appropriate safety profile with investigational new
    drug-enabling studies;

  ? successful patient enrollment in, and the initiation and completion of,
    clinical trials;

? successful clinical trials with safety, tolerability and

efficacy profiles satisfactory to the FDA or other comparable foreign

regulatory authority;

? receipt of regulatory approvals from applicable regulatory authorities;

? the timing, receipt and conditions of any marketing approval of

    regulatory authorities;

  ? our ability to establish new licensing or collaboration arrangements;

? establish agreements with third party manufacturers for clinical supply

our clinical trials and commercial manufacture, where applicable, of our products

candidates are approved;

? timely development and delivery of clinical and commercial grade drugs

    formulations that can be used in our clinical trials and for commercial
    launch;

  ? obtaining, maintaining, defending and enforcing patent claims and other
    intellectual property rights;




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? initiate commercial sales of product candidates, if approved, alone

or in collaboration with others;

? maintain an ongoing and acceptable safety profile of product candidates

after approval; and

? the potential impact of COVID-19 on operations that may affect, among others

things, the schedule of clinical trials, the availability of raw materials and the

the ability to access and secure test facilities.





A change in the outcome of any of these variables with respect to the
development of our product candidates could significantly change the costs and
timing associated with the development of that product candidate. We may never
succeed in obtaining regulatory approval for any of our product candidates.

General and administrative expenses




General and administrative expenses consist primarily of salaries and related
costs for personnel, including share-based compensation, in executive, finance
and administrative functions. General and administrative expenses also include
direct and allocated facility-related costs as well as professional fees for
legal, patent, consulting, accounting, and audit services.



Our general and administrative expenses will increase in the future as we
increase our headcount to support continued research activities and development
of product candidates. We will continue to incur increased accounting, audit,
legal, regulatory, compliance and director and officer insurance costs as well
as investor and public relations expenses associated with being a public
company.



Interest Income


Interest income consists primarily of amounts earned on a previously unpaid note receivable from Chanticleer.



Foreign Exchange Loss


The exchange loss consists of changes in exchange rates on transactions denominated in currencies other than the we dollar.



Other Income


In 2021, we recorded other income related to the cancellation of the Company’s PPP loan.



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Results of Operations



Comparison of completed years September 30, 2021 and 2020

The following table summarizes the results of operations of the Company for the years ended. September 30, 2021 and 2020:



                                          Year Ended September 30,
                                           2021              2020             Change
Collaboration revenue                  $     483,626     $           -     $     483,626
Operating expenses
Research and development                  16,634,553         9,877,555         6,756,998
Acquired in-process research and
development                                        -         6,826,495        (6,826,495 )
General and administrative                 8,936,509         7,533,722         1,402,787
Total operating expenses                  25,571,062        24,237,772         1,333,290
Loss from operations                     (25,087,436 )     (24,237,772 )       1,816,916
Interest income                                   15            20,677           (20,662 )
Foreign exchange loss                        (22,041 )         (48,020 )          25,979
Other income                                 125,501                 -           125,501
Net loss                               $ (24,983,961 )   $ (24,265,115 )   $    (718,846 )




Collaboration Revenue


The Company has recognized $ 0.5 million of revenue related to the New Life Agreement during the fiscal year ended September 30, 2021.

Research and development costs




Research and development expenses were $16.6 million for the year ended
September 30, 2021, compared to $9.9 million for the year ended September 30,
2020. The increase of $6.8 million was primarily due to the development of the
cell lines for IL12-FHAB, IL12-FHAB-IL15 and SON-080, and an increase in payroll
and share-based compensation expense as we continue to expand our operations.



Current research acquired and development




In connection with the acquisition of Relief, the intellectual property acquired
related to atexakin alfa was immediately expensed since future development and
regulatory approval is required.



General and administrative expenses




General and administrative expenses were $8.9 million for the year ended
September 30, 2021, compared to $7.5 million for the year ended September 30,
2020. The increase of $1.4 million was primarily due to an increase in payroll
and share-based compensation expense and insurance expenses related to directors
and officer's insurance as we continue to expand our operations to support our
research and development efforts, partially offset by a $1.4 million decrease in
professional fees and transaction related fees associated with the closing
of
the Merger.



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Other Income


Other income from $ 0.1 million was recognized in connection with the cancellation of the Company’s PPP loan in June 2021.

Liquidity and capital resources

We have accumulated a $61.7 million deficit since inception. We have funded
operations to date primarily with proceeds from sales of common stock, warrants
and proceeds from the issuance of convertible debt. We will likely offer
additional securities for sale during our fiscal year 2022 or thereafter in
response to market conditions or other circumstances if we believe such a plan
of financing is required to advance the Company's business plans and is in the
best interests of our stockholders. There is no certainty that equity or debt
financing will be available in the future or that it will be at acceptable terms
and at this time, it is not possible to predict the outcome of these matters.



We have incurred significant net losses of approximately $25.0 million and $24.3
million for the years ended September 30, 2021 and 2020, respectively. We expect
to continue to incur significant operational expenses and net losses in the
upcoming 12 months and beyond. Our net losses may fluctuate significantly from
quarter to quarter and year to year, depending on the stage and complexity of
our R&D studies and related expenditures, the receipt of additional payments on
the licensing of our technology, if any, and the receipt of payments under any
current or future collaborations we may enter into.



The Company has evaluated whether there are conditions or events, considered in
the aggregate, that raise substantial doubt about the Company's ability to
continue as a going concern. The Company believes its cash of $27.6 million at
September 30, 2021 will fund the Company's projected operations into August
2022. Substantial additional financing will be needed by the Company to fund its
operations. These factors raise substantial doubt about the Company's ability to
continue as a going concern.



The following table summarizes the Company's sources and uses of cash for each
of the years presented:



                                               Year Ended September 30,
                                                2021              2020

Net cash used in operating activities $ (22,552,245) $ (15,614,779)
Net cash used in investing activities

              (3,623 )         (76,183 )
Net cash provided by financing activities      42,828,032        23,005,212
Net increase in cash                        $  20,272,164     $   7,314,250




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Operating Activities


During the year ended September 30, 2021, We used $ 22.6 million cash flow from operating activities, mainly attributable to our net loss of $ 25.0 million. This amount was offset by $ 1.4 million stock-based compensation expense, and a $ 1.0 million significant decrease in operating assets and liabilities.

During the year ended September 30, 2020, we used $15.6 million of cash in
operating activities which was primarily attributable to our net loss of $24.3
million. This amount was offset by a $6.8 million charge for in-process research
and development related to the Relief Acquisition, a $1.4 million net increase
in operating assets and liabilities and $0.4 million in share-based compensation
expense.



Investing Activities


In the past years September 30, 2021 and 2020, we bought $ 3,623 and $ 76,183, respectively, office furniture and computer equipment.



Financing Activities


During the year ended September 30, 2021, the net cash from financing activities was $ 42.8 million, consisting primarily of the net proceeds from the sale of common shares and warrants.

During the year ended September 30, 2020, the net cash from financing activities was $ 23.0 million, composed mainly of $ 19.1 million the net proceeds from the sale of ordinary shares and warrants, $ 9.8 million the net proceeds received from the exercise of the warrants, and $ 0.1 million upon receipt of the loan proceeds. These sources of liquidity were partially offset by a $ 6.0 million payment under the Merger.



Funding Requirements



We expect our expenses to increase substantially in connection with our ongoing
activities, particularly as we advance preclinical activities and clinical
trials of product candidates in development. In addition, we expect to incur
additional costs associated with operating as a public company. The timing and
amount of our operating expenditures will depend largely on:



? scope, number, launch, progress, schedule, costs, design, duration, everything

the potential delays and the results of clinical trials and non-clinical studies for

our current or future product candidates;

? the clinical development plans that we establish for these product candidates;

? the number and characteristics of the product candidates and programs that we

develop or may license;

? the outcome, timing and cost of regulatory reviews, approvals or other actions

to meet regulatory requirements established by the FDA and comparable foreign

regulatory authorities, including potential FDA or comparable

foreign regulatory authorities to require that we conduct more studies for our

    product candidates than those that we currently expect;




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  ? our ability to obtain marketing approval for product candidates;

? the cost of filing, prosecuting, defending and enforcing patent claims and

    other intellectual property rights covering our product candidates;

? our ability to maintain, extend and defend the reach of our

real estate portfolio, including intellectual property defense costs

litigation, including patent infringement actions brought by third parties

against us or our product candidates;

? the cost and timing of completion of commercial scale outsourced manufacturing

product candidate activities;

? our ability to establish and maintain licenses, collaborations or the like

agreements on favorable terms and whether and to what extent we withhold

development or marketing responsibilities under any new license,

collaboration or similar arrangement;

? the cost of establishing sales, marketing and distribution capacities for

any product candidate for which we may receive regulatory approval in the regions

where we choose to market our products on our own;

? the success of any other business, product or technology we acquire

    or in which we invest;

  ? the costs of acquiring, licensing or investing in businesses, product
    candidates and technologies;

? our need and ability to hire additional and scientific and medical staff

staff;

? the costs of operating as a public enterprise in United States, including the

need to implement additional financial and reporting systems and other

the internal systems and infrastructure of our business;

? market acceptance of our product candidates, to the extent that they are approved

    for commercial sale;

  ? the effect of competing technological and market developments; and

? the potential impact of the COVID-19 pandemic on our clinical trials and

    operations.




Until such time, if ever, as we can generate substantial product revenue, we
expect to finance our cash needs through a combination of equity offerings, debt
financings, collaborations, strategic alliances, and marketing, distribution or
licensing arrangements with third parties. To the extent that we raise
additional capital through the sale of equity or convertible debt securities,
the ownership interest of the Company may be materially diluted, and the terms
of such securities could include liquidation or other preferences that adversely
affect the rights of our stockholders. Debt financing and preferred equity
financing, if available, may involve agreements that include restrictive
covenants that limit our ability to take specified actions, such as incurring
additional debt, making capital expenditures or declaring dividends. If we raise
funds through collaborations, strategic alliances or marketing, distribution or
licensing arrangements with third parties, we may have to relinquish valuable
rights to technologies, future revenue streams, research programs or product
candidates, or grant licenses on terms that may not be favorable to us. If we
are unable to raise additional funds through equity or debt financings or other
arrangements when needed, we may be required to delay, reduce or eliminate
product development or future commercialization efforts, sell off assets, or
grant rights to develop and market product candidates that we would otherwise
prefer to develop and market.



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Obligations and contractual commitments

The following table summarizes the Company’s contractual obligations as of
September 30, 2021 and the effects these obligations are expected to have on its liquidity and cash flows in future periods:



                               Less than                                             More than 5
                                 1 Year        1 to 3 Years       4 to 5 Years          Years           Total
Operating Lease (1)            $  103,440     $       34,695     $            -     $           -     $ 138,135
Debt Obligations (2)                  748                  -               
  -                 -           748
Total                          $  104,188     $       34,695     $            -     $           -     $ 138,883



(1) Reflects the obligations under the Company’s office lease in Princeton, New Jersey.

(2) Reflects unsecured notes payable issued to certain related parties.




In addition to the contracts with payment commitments that we have reflected in
the table above, we have entered into other contracts in the normal course of
business with certain CROs, CMOs and other third-parties for preclinical
research studies and testing, clinical trials and manufacturing services. These
contracts do not contain any minimum purchase commitments and are cancelable
upon prior notice and as a result, are not included in the table of contractual
obligations and commitments above. Payments due upon cancellation consist only
of payments for services provided and expenses incurred, including
non-cancelable obligations to our service providers, up to the date of
cancellation.



Critical accounting policies

Our management's discussion and analysis of financial condition and results of
operations are based on our consolidated financial statements, which have been
prepared in accordance with U.S. GAAP. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, and expenses and the disclosure of contingent
assets and liabilities in our financial statements. On an ongoing basis, we
evaluate our estimates and judgments, including those related to the accrual for
research and development expenses. We base our estimates on historical
experience, known trends and events, and various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.



While the Company's significant accounting policies are described in more detail
in the notes to the consolidated financial statements included elsewhere in this
Form 10-K, we believe that the following accounting policies are those most
critical to the judgments and estimates used in the preparation of the
consolidated financial statements.



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Research and development costs

Research and development costs consist primarily of costs incurred in the development of our product candidates. We charge research and development costs as they are incurred.




At the end of each reporting period, we compare payments made to third-party
service providers to the estimated progress toward completion of the applicable
research or development objectives. Such estimates are subject to change as
additional information becomes available. Depending on the timing of payments to
the service providers and the progress that we estimate has been made as a
result of the service provided, we may record net prepaid or accrued expense
relating to these costs. As of September 30, 2021, we did not make any material
adjustments to our prior estimates of accrued research and development expenses.



Off-balance sheet provisions

We do not have any relationships with unconsolidated entities or financial
partnerships, including entities sometimes referred to as structured finance or
special purpose entities that were established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or limited
purposes. We do not engage in off-balance sheet financing arrangements. In
addition, we do not engage in trading activities involving non-exchange traded
contracts. We therefore believe that we are not materially exposed to any
financing, liquidity, market or credit risk that could arise if we had engaged
in these relationships.


Recently published accounting position papers




A description of recently issued accounting pronouncements that may potentially
impact our financial position and results of operations is disclosed in Note 2
to the consolidated financial statements included elsewhere in this Form 10-K.

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