CANDEL THERAPEUTICS, INC. Management report and analysis of the financial situation and operating results. (Form 10-Q)

You should read the following discussion and analysis of our financial condition
and results of operations together with our financial statements and the related
notes and other financial information included elsewhere in this Form 10-Q. Some
of the information contained in this discussion and analysis contains
forward-looking statements that involve risks and uncertainties. You should
review the section titled "Risk factors" in this Form 10-Q for a discussion of
important factors that could cause actual results to differ materially from the
results described below.

Overview

We are a late clinical stage biopharmaceutical company focused on helping
patients fight cancer with oncolytic viral immunotherapies. Our engineered
viruses are designed to induce immunogenic death through direct viral-mediated
cytotoxicity in cancer cells, thus releasing tumor neo-antigens and creating a
pro-inflammatory microenvironment at the site of injection. Our approach
combines an in-depth knowledge of viral immunotherapy with extensive clinical
experience across a wide range of indications. Based on the broad range of data
that we have generated from our preclinical models and clinical trials using our
approach, we have observed what we believe to be systemic immune response
against locally injected tumors and their distant metastases. We have
established two oncolytic viral immunotherapy platforms based on novel,
genetically modified adenovirus and herpes simplex virus (HSV) constructs. In
our clinical results to date from CAN-2409, our lead adenovirus product
candidate, and CAN-3110, our lead product candidate from our HSV platform, we
have observed that these candidates may have the potential to address
significant unmet patient need and improve clinical outcomes in novel
indications across broader patient populations.

In non-small cell lung cancer (NSCLC), we have previously observed monotherapy
activity of CAN-2409 in a Phase 1 biomarker focused window of opportunity trial.
In 2020, we initiated a Phase 2 clinical trial evaluating CAN-2409 plus
valacyclovir in combination with PD-(L)1 checkpoint inhibitors for patients with
inadequate response to PD-(L)1 checkpoint inhibitors. This open label trial is
targeting enrollment of approximately 96 patients with stage III/IV NSCLC in
three separate cohorts. The cohorts are defined based on response to checkpoint
inhibitors at the time of enrollment. Patients will continue treatment with
their initial checkpoint inhibitor and CAN-2409 will be added to their regimen.
The primary efficacy endpoint for this trial is response rate measured by
response evaluation criteria in solid tumors (RECIST). At the American Society
for Clinical Oncology (ASCO) in June 2022, the Company reported initial data, as
of April 20, 2022, from 35 enrolled patients, of which 20 were evaluable for
efficacy. A summary of the data is as follows

87.5% disease control rate achieved in patients who all progressed on anti-PD-1 treatment at the start of the trial.

Evidence of tumor regression in injected and non-injected lesions.

Partial response in 3 (15%) patients.

CAN-2409 was well tolerated with no treatment-related Grade 4 adverse events reported and no Grade 3 adverse events reported in three patients.

We expect to present updated clinical data from this trial in Q4 2022.

We are also evaluating CAN-2409 in newly diagnosed high-grade glioma. The FDA
has granted CAN-2409 fast track designation for use in this setting in
combination with standard of care surgery and chemoradiation. We intend to
initiate a potentially registrational Phase 3 trial in this indication in the
third quarter of 2022. The randomized placebo-controlled trial will compare
CAN-2409 paired with prodrug (valacyclovir), surgery and radiotherapy, and
temozolomide for patients with methylated MGMT promoters for whom temozolomide
is indicated, to a control arm where CAN-2409 will be replaced by a placebo in
the treatment regimen. This trial will be randomized at a ratio of 1 to 1 in the
active versus control arms and will assess efficacy based on overall survival.
It is intended to enroll approximately 600 patients.

Interim data from a fully accrued Phase 1b trial of CAN-2409 in combination with
nivolumab, valacyclovir and standard of care treatment in patients with newly
diagnosed high-grade glioma are anticipated in the fourth quarter of 2022.
Nivolumab previously failed to meet the primary endpoint of improved median
overall survival in a separate 369 patient Phase 3 glioblastoma trial suggesting
the challenge of eliciting an immune effect in brain cancer with systemically
administered checkpoint inhibitors.

Our most advanced product candidate, CAN-2409, is an off-the-shelf adenovirus
product candidate combined with the prodrug valacyclovir that has generated
promising clinical activity across a range of solid tumor indications, including
our lead indication of prostate cancer. We are currently conducting, as part of
our most advanced CAN-2409 program, a Phase 3 clinical trial in the United
States under a Special Protocol Assessment, or SPA, with the U.S. Food and Drug
Administration (FDA) for CAN-2409 in patients with newly diagnosed localized
prostate cancer who have an intermediate- or high-risk for progression. We
completed enrollment for this trial in September 2021 and we expect a final data
readout at the end of 2024.

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In addition, we are advancing development of our HSV platform product candidates
for solid tumor indications. Our lead HSV product candidate, CAN-3110, is
currently in an ongoing investigator-initiated Phase 1 clinical trial in our
initial target indication of recurrent high-grade glioma. Initial clinical data
from this trial was presented in an oral presentation at ASCO in June 2021, and
we reported additional biomarker data in November 2021. We anticipate clinical
data from additional patients in the fourth quarter of 2022. We are also
designing other novel oncolytic viral immunotherapy candidates using our
enLIGHTEN platform that is based on HSV.

Our oncolytic viral immunotherapy approach utilizes intratumoral administration
of genetically engineered viruses to selectively induce tumor cell death and
elicit an innate and adaptive anti-tumor immune response. Local delivery enables
us to achieve these effects while aiming to minimize systemic toxicity. The
immune cells induced by these viral immunotherapies are believed to target
patients' specific tumor antigens, potentially improving responses in
immunologically "hot" tumors while at the same time infiltrating the tumor
microenvironment, transforming non-inflamed "cold" tumors with limited immune
response into "hot" tumors. In our data from our clinical studies in patients
with cancer, we have observed increases in the expression of immune checkpoints
PD-1, PD-L1 and CTLA-4 following treatment with CAN-2409 supporting the
evaluation of combinations with immune checkpoint inhibitors (ICI) such as
anti-PD-(L)1 that, typically, are only efficacious in patients with
immunologically "hot" tumors. While our product candidates are administered
directly into the tumor, we have observed systemic immune response in our
preclinical studies and clinical trials that may indicate the potential of
CAN-2409 and CAN-3110 to induce systemic immune response against distal,
uninjected tumors, also known as an "abscopal" effect.

We believe oncolytic viral immunotherapy is among the most promising cancer
treatment modalities today. Treatment with oncolytic viral immunotherapy has
already been clinically validated through talimogene laherparepvec (IMLYGIC,
Amgen), the first FDA-approved intratumoral oncolytic virus. Our goal is to
further improve patient outcomes from oncolytic viral immunotherapies by
selecting the optimal vector, specific transgenes and clinical indications for
each tumor type while optimizing product candidate attributes, such as
high-titer formulation, intratumoral administration, and storage conditions that
could potentially lower logistical barriers for patients and clinicians.

Collaborations

We are a party to a number of license and collaboration agreements under which
we license patents, patent applications and other intellectual property to and
from third parties.

Periphagen. On December 9, 2019, we entered into a series of agreements,
including an exclusive license agreement, a novation agreement, an equipment
purchase agreement and an intellectual property assignment agreement,
collectively the Periphagen Agreements, with Periphagen, whereby we acquired
certain assets and licensed certain rights (including specified patent rights
and know-how, or the Licensed IP Rights) of Periphagen, primarily consisting of
exclusive rights to their technology platform and a portfolio of pre-clinical,
development stage virus vectors, as well as certain physical property and
equipment. The primary classes of assets are HSV-derived assets expressing
neurotrophin-3 (or NT-3 Assets) and other HSV-derived assets (Gene Transfer
Neuro-Assets). Under the license agreement, Periphagen granted us a worldwide
exclusive license with the right to grant sublicenses through multiple tiers
under the Licensed IP Rights to conduct research and to develop, make, have
made, use, have used, offer for sale, have sold, export and import products
incorporating the Licensed IP Rights in all fields of use except the treatment,
diagnosis, and prevention of nononcologic skin diseases and conditions
(including use as an aesthetic).

MGB. On January 20, 2018, we entered into an exclusive option agreement, or the
Option Agreement, with MGB. Pursuant to the Option Agreement, we obtained the
exclusive right from MGB to negotiate an exclusive worldwide, royalty-bearing
license to develop and commercialize products covered by certain MGB patents,
including those patents covering CAN-3110, in the field of gene therapy and
oncolytic vector therapy for the treatment or prevention of cancerous tumors in
humans or animals, as such field is further detailed in the Option Agreement, or
the Licensed Field. In consideration for MGB's granting of the exclusive option,
we paid MGB a non-refundable fee of $40,000.

Under the Option Agreement, we were required to use reasonable efforts to enter
into a clinical trial agreement with MGB. We entered into such clinical trial
agreement with MGB, or the MGB Clinical Trial Agreement, on June 19, 2018. Under
the MGB Clinical Trial Agreement, we have committed to remitting up to $750,000
for the performance of a specified Phase 1 clinical trial by MGB pursuant to a
protocol summary contained in the Option Agreement.

On September 15, 2020, we exercised our option and entered into an exclusive
patent license agreement with MGB, or the MGB License Agreement. Under the MGB
License Agreement, MGB granted to us (a) an exclusive, royalty-bearing license
under certain of MGB's patents to make, have made, use, have used, sell and have
sold certain products covered by such licensed patents, or the Licensed Products
and otherwise practice processes covered by such licensed patents, or Licensed
Processes; and (b) a non-exclusive, royalty-bearing license under certain other
of MGB's patents to make, have made, use, have used, sell and have sold Licensed
Products, but not to sell or have sold Licensed Processes. The foregoing rights
are sublicensable, subject to sublicensing terms set forth in the MGB License
Agreement. In connection with executing the MGB License Agreement, we paid a
license issue fee of $100,000. We also agreed to reimburse MGB for all
reasonable fees and expenses MGB had incurred and will incur for the
preparation, filing, prosecution and maintenance of the licensed patent rights.

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Ventagen. On March 1, 2014, we entered into an exclusive license agreement, or
the Ventagen Agreement, with Ventagen, LLC, or Ventagen. The Ventagen Agreement
provides Ventagen an exclusive license, with rights to grant sublicenses
(subject to certain terms and conditions) under any worldwide patent rights and
know-how owned or controlled by us during the term of the Ventagen Agreement
which cover applicable technology utilizing the delivery method of the herpes
derived TK protein to tumors or other tissues via a viral vector (as further
specified therein), to research, use, have used, import, have imported, export,
have exported, offer for sale, have sold, sell, distribute and market certain
products for the prevention or treatment of cancer in humans and any use in
animals, or the Licensed Products, for commercial sale and distribution within
Mexico, Belize, Guatemala, Honduras, El Salvador, Costa Rica, Nicaragua, Panama,
Colombia and Bolivia.

Impact of COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of the novel
coronavirus, or COVID-19, a global pandemic, or the COVID-19 pandemic, which
continues to spread throughout the United States and worldwide. The ultimate
extent of the impact of the COVID-19 pandemic on our business, financial
condition and results of operations is highly uncertain and will depend on
future developments that cannot be predicted, including new information that may
emerge concerning the severity of COVID-19 and actions taken by government
authorities and businesses to contain or prevent the further spread of COVID-19.
For instance, a recurrence or continuation of COVID-19 cases, including new
variants, could cause a more widespread or severe impact on commercial activity
depending on where infection rates are highest. If we or any of the third
parties with whom we engage were to experience any additional shutdowns or other
prolonged business disruptions as a result of the ongoing COVID-19 pandemic, our
ability to conduct our business in the manner and on the timelines presently
planned could be materially or negatively affected, which could have a material
adverse impact on our business, results of operations and financial condition.

We have been carefully monitoring the ongoing COVID-19 pandemic and its impact
on our business and have taken important steps to help ensure the safety of our
employees and their families and to reduce the spread of COVID-19. We have
established a flexible work policy for all employees under which we encourage
all of our employees to work from the office or home as they feel appropriate.
Those employees performing or supporting business-critical operations, such as
certain members of our laboratory and facilities staff are working on site on a
daily basis. For those employees, who come to work at our facility, we have
implemented stringent safety measures designed to comply with applicable
federal, state and local guidelines instituted in response to the COVID-19
pandemic. We have also maintained efficient communication with our partners and
clinical sites during the COVID-19 pandemic. We have taken these precautionary
steps while maintaining business continuity so that we can continue to make
progress on our programs. While we have experienced delays in enrollment and
site closures at certain of our third-party clinical trial sites, these delays
have not had a material impact on our development timelines for our product
candidates. We will continue to monitor developments as we address the
disruptions and uncertainties relating to the COVID-19 pandemic. See the "Risk
Factors" section for a discussion of the potential adverse impact of the
COVID-19 pandemic on our business, financial condition and results of
operations.

Components of our operating results

Revenue

To date, we have not generated any revenue from product sales and do not expect
to generate any revenue from sales of products in the foreseeable future. We are
recognizing as research and development service revenue $1.0 million that we
received in 2014 and 2015 from Ventagen for an exclusive license to develop
products for commercial sale and development within certain countries. The $1.0
million is being recognized as revenue over the period during which we provide
services under the license agreement.

Operating Expenses

Our operating expenses since inception consist solely of research and development expenses and general and administrative expenses.

Research and development costs

Research and development expenses consist primarily of costs incurred for our
product development activities for our two primary drug candidates, CAN-2409 and
CAN-3110. We expense research and development costs as incurred. These include
the following:

?

personnel costs, including salaries, benefits and stock-based compensation expenses, for personnel engaged in research, development and clinical management functions;

?

expenses incurred under agreements with third-party clinical sites for the treatment and monitoring of patients enrolled in our clinical trials;

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?

the cost of acquiring and manufacturing preclinical study materials, including manufacturing registration and validation batches;

?

payments made under license agreements with third parties;

?
costs incurred to develop the manufacturing process and capabilities for future
clinical trials and commercialization. Our clinical trial material for use in
our existing clinical trials was manufactured in prior years;

?

costs related to compliance with quality and regulatory requirements;

?

the costs of external consultants, mainly related to regulations; and

?
facility-related expenses, which include direct depreciation costs and expenses
for rent and maintenance of facilities and insurance, and other operating costs
if specifically identifiable to research and development activities.

We expect that our research and development expenses will continue to increase
substantially for the foreseeable future and will comprise a larger percentage
of our total expenses as we complete our clinical trials and commence additional
clinical trials, continue to discover and develop additional product candidates
and develop and scale our manufacturing capabilities including payments to
contract manufacturing organizations (CMOs) for the commercial scale
manufacturing or our product candidate CAN-2409. Product candidates in later
stages of clinical development generally have higher development costs than
those in earlier stages of clinical development, primarily due to increased
scale and duration of later stage clinical trials.

We cannot determine with certainty the duration and costs of future clinical
trials of CAN-2409 and CAN-3110 or any other product candidate we may develop or
if, when, or to what extent we will generate revenue from the commercialization
and sale of any product candidate for which we obtain marketing approval. At
this time, we cannot accurately estimate or know the nature, timing and costs of
the efforts that will be necessary to complete the clinical development of, or
obtain regulatory approval for, any of our current or future product candidates.
The duration, costs, and timing of clinical trials and development of CAN-2409
and CAN-3110 and any other product candidate we may develop will depend on a
variety of factors, including:

?

the scope, rate of progress, expenditures and results of clinical trials;

?

our successful enrollment and completion of clinical trials, including our ability to generate positive data from such trials;

?

our ability to recruit and retain key research and development personnel;

?
the actual probability of success for our product candidates, including their
safety and efficacy, early clinical data, competition, manufacturing capability,
and commercial viability;

?

significant and changing government regulation and regulatory guidance;

?

the timing and receipt of any marketing authorization;

?
the progress of the development efforts of parties with whom we may enter into
collaboration agreements, and the terms and timing of any additional
collaboration agreements, license or other arrangement, including the timing of
any payments thereunder;

?
our ability to enter into agreements with CMOs for the commercial manufacture of
our product candidate CAN-2409 and the clinical scale manufacture of our product
candidate CAN-3110 as well as complete the development, construction and
qualification of our clinical manufacturing facility in Needham;

?

costs associated with manufacturing our product candidates or to account for any future changes in our manufacturing plans;

?

our ability to successfully commercialize our product candidates, if approved;

?

raise additional funds necessary to complete the clinical development of our product candidates;

?

our ability to obtain and maintain liability insurance coverage and adequate reimbursement for our product candidates, if and when approved;

?

the acceptance of our product candidates, if approved, by patients, the medical community and third-party payers;

?

compete effectively with other products if our product candidates are approved;

?
the impact of any business interruptions to our operations, including the timing
and enrollment of patients in our planned clinical trials, or to those of our
manufacturers, suppliers, or other vendors resulting from the ongoing COVID-19
pandemic or similar public health crisis;

?

our ability to maintain an acceptable continuing safety profile for our therapies following their approval;

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?
our ability to obtain and maintain patents, trade secret and other intellectual
property protection and regulatory exclusivity for our product candidates, both
in the United States and internationally; and

?

the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

A change in the outcome of any of these variables with respect to the development of a product candidate could significantly alter the costs and schedule associated with the development of such product candidate. We may never be successful in obtaining regulatory approval for any of our product candidates.

General and administrative expenses

General and administrative expenses consist primarily of salaries and other
related costs, including stock-based compensation, for personnel in our
executive, finance, business development, and administrative functions. General
and administrative expenses also include legal fees relating to intellectual
property and corporate matters; professional fees for accounting, auditing, tax
and consulting services; director and officer insurance costs; travel expenses;
and facility-related expenses, which include direct depreciation costs and
expenses for rent and maintenance of facilities, and other operating costs that
are not specifically attributable to research and development activities.

We expect that our general and administrative expenses will increase in the
future as we increase our personnel headcount to support our continued clinical
development and manufacturing activities. We also expect to incur increased
expenses associated with being a public company as a result of our initial
public offering, or the IPO, including costs of accounting, audit, legal,
regulatory, and tax-related services associated with maintaining compliance with
exchange listing and Securities and Exchange Commission, or SEC, requirements;
director and officer insurance costs; and investor and public relations costs.

Grant income

Grant revenue consists of amounts received under a grant from the National Institute of Health for the development of CAN-2409 for use as a treatment for pancreatic cancer.

Interest, dividends and investment income (expenses), net

Interest, dividend and investment income includes amounts earned on investing cash equivalents and short-term investments and is net of interest payments made on our debt.

Change in fair value of warrant liability

In connection with the November 13, 2018 issuance of Series B preferred stock we
issued warrants to the purchasers of the Series B preferred stock, to purchase
up to 7,344,968 shares of our common stock with an exercise price of $6.81 per
share. We also issued a warrant to the NC Incorporated Ohio Trust, an
irrevocable trust funded by us, to purchase 162,740 shares of our common stock,
$0.01 par value, at an exercise price of $1.46 per share, subject to adjustments
as specified in the warrant agreement. Certain of those warrants are recorded as
a liability on our balance sheet. The warrants recorded as a liability are
remeasured to their fair value at each reporting date with changes in the fair
value recognized as a component of other income (expense), net in the condensed
consolidated statements of operations. We will continue to recognize changes in
the fair value of the warrants until they are exercised, expire or qualify for
equity classification. The fair value of the warrants is determined based on
significant inputs not observable in the market. The fair value of the warrants
uses various valuation methods, including the Monte Carlo method, the
option-pricing method, probability-weighted expected return and the hybrid
method, all of which incorporate assumptions and estimates, to value the common
stock warrants. The hybrid method is often used when a company is expecting a
liquidity event in the near future and is a combination of the option-pricing
and probability-weighted expected return methods. Estimates and assumptions
impacting the fair value measurement include the fair value per share of the
underlying shares of common stock, risk-free interest rate, expected dividend
yield, and the remaining contractual term of the warrants. Therefore, the fair
value may not be appropriately captured by simple models.

Income taxes

Since our inception, we have generated cumulative federal and state net
operating loss and research and development credit carryforwards for which we
have not recorded any net tax benefit due to uncertainty around utilizing these
tax attributes within their respective carryforward periods.

As of December 31, 2021, we had federal net operating loss carryforwards, or
NOLs, of approximately $51.6 million and state NOLs of approximately $48.4
million which may be available to offset future taxable income. Our federal NOLs
include $8.8 million available to reduce future taxable income through 2028 and
approximately $42.8 million of NOLs that do not expire and are available to
reduce future taxable income indefinitely. The state NOLs are available to
offset future taxable income through 2032. As of December 31, 2021, we also had
federal and state research and development tax credit carryforwards of $2.0
million and $1.1 million, respectively, which are available to offset federal
and state tax liabilities through 2036 and 2028, respectively.

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Realization of future tax benefits is dependent on many factors, including our
ability to generate taxable income within the NOL period. Our management has
evaluated the positive and negative evidence bearing upon the realizability of
our deferred tax assets, which are comprised principally of net operating loss
carryforwards and certain tax credits. Management has considered our history of
cumulative net losses incurred since inception, as well as our lack of product
revenue since inception, and has determined that it is more likely than not that
we will not realize the benefits of its deferred tax assets. As a result, a full
valuation allowance has been established at June 30, 2022 and December 31, 2021.

NOL and tax credit carryforwards may become subject to an annual limitation in
the event of certain cumulative changes in the ownership interest of significant
shareholders over a three-year period in excess of 50%, as provided under
Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the
Code, as well as under similar state provisions. These ownership changes may
limit the amount of NOLs that can be utilized annually to offset future taxable
income. In general, an ownership change, as defined under Section 382 of the
Code, or Section 382, results from transactions increasing the ownership of
certain shareholders or public groups in the stock of a corporation by more than
50% over a three-year period. We have completed several financings and not yet
determined if such a limitation would be placed against our NOL. We will make
such a determination prior to the utilization of any NOL. Since our inception,
we have generated cumulative federal and state net operating loss and research
and development credit carryforwards for which we have not recorded any net tax
benefit due to uncertainty around utilizing these tax attributes within their
respective carryforward periods.

Operating results

Comparison of three and six months ended June 30, 2022 and 2021

The following table summarizes our operating results for the three and six months ended June 30, 2022 and 2021 (in thousands):

                                 THREE MONTHS ENDED                           SIX MONTHS ENDED
                                      JUNE 30,              INCREASE/             JUNE 30,              INCREASE/
                                 2022          2021        (DECREASE)        2022          2021        (DECREASE)
Research and development
service
  revenue                      $      31     $      31     $         -     $      63     $      63     $         -
Operating expenses:
Research and development           5,022         3,292           1,730        10,438         6,048           4,390
General and administrative         3,762         2,040           1,722         7,364         3,972           3,392
Total operating expenses           8,784         5,332           3,452        17,802        10,020           7,782
Loss from operations              (8,753 )      (5,301 )        (3,452 )     (17,739 )      (9,957 )        (7,782 )
Grant income                           -           605            (605 )           -           796            (796 )
Interest, dividend and
investment income,
  net                               (365 )         (15 )          (350 )        (540 )         (28 )          (512 )
Change in fair value of
warrant liability                  4,969       (12,369 )        17,338        13,256       (12,369 )        25,625
Net loss                       $  (4,149 )   $ (17,080 )   $    12,931     $  (5,023 )   $ (21,558 )   $    16,535




Revenue

We had research and development service revenue of $31,000 for each of the three
months ended June 30, 2022 and 2021. This represents the recognition as research
and development service revenue of a portion of the $1.0 million that we
received in 2014 and 2015 from Ventagen, a related party, which is being
recognized over the period during which we provide the services.

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Research and development costs

The following table summarizes our research and development expenses for the three months ended June 30, 2022 and 2021 (in thousands):

                                 THREE MONTHS ENDED
                                      JUNE 30,              INCREASE
                                  2022          2021       (DECREASE)
Employee-related               $    2,828      $ 2,165     $       663
Clinical development                1,540          914             626
Depreciation of fixed assets          187            -             187
Pre-clinical research                 176            8             168
Recruiting                            117           77              40
Occupancy                             110          128             (18 )
Other                                  64            -              64
                               $    5,022      $ 3,292     $     1,730



Research and development expenses for the three months ended June 30, 2022 were
$5.0 million, compared with $3.3 million for the three months ended June 30,
2021 and consisted primarily of $2.8 million and $2.2 million, respectively, of
employee-related costs, including $57,000 and $400,000, respectively, of
non-cash stock compensation expense, $1,540,000 and $914,000, respectively, of
clinical development costs related to our clinical trial sites and the cost of
treating and following up on patients in our clinical trials, regulatory and
manufacturing expenses, $187,000 and $0, respectively, of depreciation, $176,000
and $8,000, respectively, of preclinical research costs associated with our
development programs, $117,000 and $77,000, respectively, of recruiting
expenses, and $110,000 and $128,000, respectively, of occupancy costs. The
increase of $1.7 million was primarily related to $663,000 increase in
employee-related costs due to an increase in research and development headcount,
$626,000 increase in clinical development costs which was primarily driven by
increased manufacturing and regulatory costs, $187,000 increase in depreciation
primarily related to depreciation of lab equipment and leasehold improvements,
and $168,000 increase in preclinical research.

General and administrative expenses

The following table summarizes our general and administrative expenses for the three months ended June 30, 2022 and 2021 (in thousands):

                                     THREE MONTHS ENDED
                                          JUNE 30,              INCREASE
                                      2022          2021       (DECREASE)
Employee-related                   $    1,647      $ 1,487     $       160
Professional and consulting fees          771          364             407
Insurance                                 703            7             696
Recruiting                                422            5             417
Other                                     219          177              42
                                   $    3,762      $ 2,040     $     1,722



General and administrative expenses were $3.8 million for the three months ended
June 30, 2022 compared with $2.0 million for the three months ended June 30,
2021 and consisted primarily of $1.6 million and $1.5 million, respectively, of
employee-related costs, including $381,000 and $669,000, respectively, of
non-cash stock compensation expense, $771,000 and $364,000, respectively, of
professional and consulting fees, $703,000 and $7,000, respectively, of
insurance costs, and $422,000 and $5,000, respectively of recruiting costs. The
increase of $1.7 million was primarily due to an increase of $696,000 in
insurance expense, $417,000 in recruiting expenses, $407,000 in professional and
consulting fees, and $160,000 in employee related costs as we increased our
general and administrative headcount to manage growth and operate as a public
company. Insurance expense increased due to the cost of directors and officers
insurance upon completion of the IPO. The increase in recruiting fees was
primarily due to a search for three new members of our Board of Directors. The
increase in professional and consulting fees was primarily due to an increase in
fees paid to investor and public relations consultants and to legal and
accounting firms.

Grant income

Grant income was $0 and $605,000 for the three months ended June 30, 2022 and
2021, respectively. Grant income for the three months ended June 30, 2021
represents amounts received under a grant from the National Institutes of Health
for development of CAN-2409 for use as a therapy for pancreatic cancer. This
grant was completed as of December 31, 2021.

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Interest, dividends and investment expenses, net

Interest, dividend and investment expense was $365,000 for the three months
ended June 30, 2022 compared with an expense of $15,000 for the three months
ended June 30, 2021 and represents the interest expense on our debt obligations,
which is net of earnings on our cash equivalents. The increase was primarily due
to increased interest expense incurred as a result of increased borrowing in the
first quarter of 2022.

Change in fair value of warrant liability

The change in fair value of our warrant liability was a decrease in value of
$5.0 million for the three months ended June 30, 2022 compared with an increase
in value of $12.4 million for the three months ended June 30, 2021. The decrease
in the warrant liability value for the three months ended June 30, 2022 was
primarily due to the decrease in our stock price from March 31, 2022 to June 30,
2022. The increase in the warrant liability value for the three months ended
June 30, 2021 was primarily due to the increase in the valuation of our company
from March 31, 2021 to June 30, 2021.

Comparison of the six months ended June 30, 2022 and 2021

The following table summarizes our operating results for the six months ended June 30, 2022 and 2021 (in thousands):

                                    THREE MONTHS ENDED                           SIX MONTHS ENDED
                                         JUNE 30,              INCREASE/             JUNE 30,              INCREASE/
                                    2022          2021        (DECREASE)        2022          2021        (DECREASE)
Research and development
service
  revenue                         $      31     $      31     $         -     $      63     $      63     $         -
Operating expenses:
Research and development              5,022         3,292           1,730        10,438         6,048           4,390
General and administrative            3,762         2,040           1,722         7,364         3,972           3,392
Total operating expenses              8,784         5,332           3,452        17,802        10,020           7,782
Loss from operations                 (8,753 )      (5,301 )        (3,452 )     (17,739 )      (9,957 )        (7,782 )
Grant income                              -           605            (605 )           -           796            (796 )
Interest, dividend and
investment income,
  net                                  (365 )         (15 )          (350 )        (540 )         (28 )          (512 )
Change in fair value of warrant
liability                             4,969       (12,369 )        17,338        13,256       (12,369 )        25,625
Net loss                          $  (4,149 )   $ (17,080 )   $    12,931     $  (5,023 )   $ (21,558 )   $    16,535




Revenue

We had research and development service revenue of $63,000 for each of the six
months ended June 30, 2022 and 2021. This represents the recognition as research
and development service revenue of a portion of the $1.0 million that we
received in 2014 and 2015 from Ventagen, a related party, which is being
recognized over the period during which we provide the services.

Research and development costs

The following table summarizes our research and development expenses for the six months ended June 30, 2022 and 2021 (in thousands):

                                 SIX MONTHS ENDED
                                     JUNE 30,             INCREASE
                                 2022         2021       (DECREASE)
Employee-related               $   6,578     $ 3,661     $     2,917
Clinical development               2,579       1,770             809
Pre-clinical research                375          80             295
Depreciation of fixed assets         352           -             352
Occupancy                            224         257             (33 )
Recruiting                           196         280             (84 )
Other                                134           -             134
                               $  10,438     $ 6,048     $     4,390



Research and development expenses for the six months ended June 30, 2022 were
$10.4 million, compared with $6.0 million for the six months ended June 30, 2021
and consisted primarily of $6.6 million and $3.7 million, respectively, of
employee-related costs, including $199,000 and $516,000, respectively, of
non-cash stock compensation expense, $2.6 million and $1.8 million,
respectively, of clinical development costs related to our clinical trial sites
and the cost of treating and following up on patients in

                                       27
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our clinical trials, regulatory, and manufacturing expenses, $375,000 and
$80,000, respectively, of preclinical research costs associated with our
development programs, $352,000 and $0, respectively, of depreciation, $224,000
and $257,000, respectively, of occupancy costs, and $196,000 and $280,000,
respectively, of recruiting expenses. The increase of $4.4 million was primarily
related to $2.9 million increase in employee-related costs due to an increase in
research and development headcount and $1.0 million in severance associated with
the termination of our former Chief Scientific Officer and Chief Medical Officer
in February 2022, $809,000 increase in clinical development costs which was
primarily driven by increased manufacturing and regulatory costs, $352,000
increase to depreciation primarily related to depreciation of lab equipment and
leasehold improvements, and a $295,000 increase in preclinical research. These
increases were partially offset by a decrease of $84,000 in recruiting costs.

General and administrative expenses

The following table summarizes our general and administrative expenses for the six months ended June 30, 2022 and 2021 (in thousands):

                                     SIX MONTHS ENDED
                                         June 30,             INCREASE
                                     2022         2021       (DECREASE)
Employee-related                   $   3,219     $ 2,517     $       702
Professional and consulting fees       1,812       1,113             699
Insurance                              1,402          14           1,388
Recruiting                               496           5             491
Other                                    435         323             112
                                   $   7,364     $ 3,972     $     3,392



General and administrative expenses were $7.4 million for the six months ended
June 30, 2022 compared with $4.0 million for the six months ended June 30, 2021
and consisted primarily of $3.2 million and $2.5 million, respectively, of
employee-related costs, including $730,000 and $984,000, respectively, of
non-cash stock compensation expense, $1.8 million and $1.1 million,
respectively, of professional and consulting fees, $1.4 million and $14,000,
respectively, of insurance costs, and $496,000 and $5,000 of recruiting fees.
The increase of $3.4 million was primarily due to increases of $1.4 million in
insurance expense, $702,000 in employee related costs as we increased our
general and administrative headcount to manage growth and operate as a public
company, $699,000 in professional and consulting fees, and $491,000 in
recruiting fees. Insurance expense increased due to the cost of directors and
officers insurance upon completion of the IPO. The increase in professional and
consulting fees is primarily due to an increase in fees paid to investor and
public relations consultants and legal and accounting firms. The increase in
recruiting costs is primarily due to a search for three new members of our Board
of Directors.

Grant income

Grant income was $0 and $796,000 for the six months ended June 30, 2022 and
2021, respectively. Grant income for the six months ended June 30, 2021
represents amounts received under a grant from the National Institutes of Health
for development of CAN-2409 for use as a therapy for pancreatic cancer. This
grant was completed as of December 31, 2021.

Interest, dividends and investment expenses, net

Interest, dividend and investment expense was $540,000 for the six months ended
June 30, 2022 compared with an expense of $28,000 for the six months ended June
30, 2021 and represents the interest expense on our debt obligations, which is
net of earnings on our cash equivalents. The increase is primarily due to
increased interest expense incurred as a result of increased borrowing in the
first quarter of 2022.

Change in fair value of warrant liability

The change in fair value of our warrant liability was a decrease in value of
$13.3 million for the six months ended June 30, 2022 compared to an increase in
value of $12.4 million for the six months ended June 30, 2021. The decrease in
the warrant liability value for the six months ended June 30, 2022 is primarily
due to the decrease in our stock price from December 31, 2021 to June 30, 2022.
The increase in the warrant liability value for the six months ended June 30,
2021 is primarily due to the increase in the Company's valuation from December
31, 2020 to June 30, 2021.

Cash and capital resources

Since our inception, we have not generated any revenue from product sales and
have incurred significant operating losses. We expect to continue to incur
significant expenses and operating losses for the foreseeable future as we
advance the clinical development of our product candidates. We expect that our
research and development and general and administrative costs will continue to
increase significantly, including in connection with conducting clinical trials
for our product candidates, developing

                                       28
--------------------------------------------------------------------------------


our manufacturing capabilities which will include the cost of establishing a
relationship with contract manufacturers to support commercial launch of our
product candidate CAN-2409 and costs associated with equipping our laboratory
and clinical manufacturing facility to support clinical trials and
commercialization and providing general and administrative support for our
operations, including the cost associated with operating as a public company. As
a result, we will need additional capital to fund our operations, which we may
obtain from additional equity or debt financings, collaborations, licensing
arrangements or other sources.

We do not currently have any approved products and have never generated any
revenue from wproduct sales. We have financed our operations primarily through
government grants and proceeds from the sale of convertible notes, sales of
common stock and our convertible preferred stock, and proceeds from debt
financing with Silicon Valley Bank ("SVB"). As of June 30, 2022, we have raised
approximately $160.6 million, including $15.4 million of government grants,
$66.1 million from the sale of convertible preferred stock, and $79.1 million
from the sale of our common stock in our IPO. In addition, in February 2022, we
borrowed $20.0 million under the loan and security agreement, or the Loan
Agreement, with SVB. Our cash and cash equivalents totaled $86.8 million as of
June 30, 2022. We had $20.6 million of long-term debt as of June 30, 2022.

Cash flow

The following table summarizes our sources and uses of cash for the six months ended June 30, 2022 and 2021 (in thousands):

                                                          SIX MONTHS ENDED
                                                              JUNE 30,
                                                         2022          2021
Net cash used in operating activities                  $ (15,150 )   $ (10,086 )
Net cash used in investing activities                       (806 )        (939 )
Net cash provided by financing activities                 19,938           

445

Net increase (decrease) in cash and cash equivalents $3,982 ($10,580)

Cash flow for the six months ended June 30, 2022 and 2021

Operational activities

Net cash used in operating activities for the six months ended June 30, 2022 was
$15.2 million, primarily consisting of a net loss of $5.0 million as we incurred
expenses associated with our clinical programs, increased headcount and incurred
costs associated with operating as a public company. In addition, we had
non-cash income of $13.3 million as a result of the change in the fair value of
our warrant liability. Non-cash income was partially offset by $1.5 million in
non-cash charges primarily related to depreciation and non-cash stock
compensation expense. Net cash used in operating activities was also impacted by
$1.6 million in changes in operating assets and liabilities, primarily driven by
a decrease of $1.8 million in prepaids and other current assets.

Net cash used in operating activities for the six months ended June 30, 2021 was
$10.1 million, primarily consisting of a net loss of $21.6 million and non-cash
charges of $13.5 million primarily as a result of the $12.4 million expense as a
result of the change in the fair value of our warrant liability and $1.4 million
of non-cash stock compensation expense which was partially offset by $464,000
from the forgiveness of the Paycheck Protection loan. Net cash used in operating
activities was also impacted by $2.0 million in changes in operating assets and
liabilities, primarily driven by a decrease of $1.2 million in accrued expenses
and an increase of $506,000 in other long term assets.

Investing activities

Net cash used in investing activities for the six months ended June 30, 2022 has been
$806,000 and consisted of the purchase of fixed assets.

Net cash used in investing activities for the six months ended June 30, 2021 has been
$939,000 and consisted of the purchase of fixed assets.

Fundraising activities

Net cash provided by financing activities for the six months ended June 30, 2022
was $19.9 million and primarily consisted of $19.9 million of net proceeds from
a term loan with a bank.

Net cash provided by financing activities for the six months ended June 30, 2021
was $445,000 and consisted of $410,000 of proceeds from exercise of warrants and
$35,000 of proceeds from the exercise of stock options.

                                       29
--------------------------------------------------------------------------------

Financing needs

We expect our operating expenses to increase substantially in the future in
connection with our ongoing activities, particularly as we advance CAN-2409 and
CAN-3110 through research and development, clinical trials, develop our
manufacturing capabilities with a CMO and build our laboratory and clinical
manufacturing facility, as we research and develop additional product candidates
including preclinical activities and as we prepare for marketing approval and
commercialization. We also expect to incur additional costs associated with
operating as a public company.

Specifically, our costs and expenses will increase as we:

?

advance the clinical development of CAN-2409 and CAN-3110;

?

pursue the preclinical and clinical development of other product candidates using our HSV platform;

?

expand our manufacturing capabilities, including establishing a relationship with a contract manufacturer for commercial manufacturing of our CAN-2409 product candidate and building our laboratory and clinical manufacturing facilities for our CAN-3110 product candidate; and

?

expand our operational, financial and management systems and increase staff, including staff to support our operations as a public company.

We believe that our existing cash and cash equivalents as of June 30, 2022, will
enable us to fund our operating expenses and capital expenditure requirements
into the first quarter of 2024. We have based this estimate on assumptions that
may prove to be incorrect, and we could utilize our available capital resources
sooner than we currently expect.

Because of the numerous risks and uncertainties associated with the research,
development, and commercialization of therapeutics, it is difficult to estimate
with certainty the amount of our working capital requirements. Our future
funding requirements will depend on many factors, including:

?

the progress, costs and results of our clinical development and clinical trials for CAN-2409 and CAN-3110;

?

the progress, costs and results of our additional research and preclinical development programs;

?

the costs, timing and results of regulatory review of our product candidates;

?

our ability to establish and maintain collaborations on favorable terms, if at all;

?
the outcome, timing and cost of meeting regulatory requirements established by
the FDA and comparable foreign regulatory authorities, if applicable, for our
product candidates;

?

internal process development costs and timing for our manufacturing capabilities;

?

the scope, progress, results and costs of any product candidates we may derive from our HSV platform or with collaborators;

?
the costs of preparing, filing and prosecuting patent applications, obtaining,
maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims; hire additional personnel in research,
manufacturing, and regulatory and clinical development, as well as management
personnel;

?

the extent to which we license or acquire rights to other products, product candidates or technologies;

?

additions or departures of key scientific or management personnel;

?

the costs and timing of future commercialization activities, including manufacturing, marketing, sales and product distribution for any of our product candidates for which we obtain marketing approval;

?

the amount of revenue, if any, from commercial sales of our product candidates, if any of our product candidates receive marketing approval; and

?

operating costs as a public company.

Until such time as we can generate significant revenue from product sales, if
ever, we expect to finance our cash needs through a combination of public or
private equity or debt financings and other sources, which may include
collaborations strategic alliances and licensing arrangements with third
parties. We do not have any committed external source of funds. To the extent
that we raise additional capital through the sale of equity or convertible debt
securities, your ownership interest may be diluted, and the terms of these
securities may include liquidation or other preferences that could adversely
affect your rights as a common stockholder. Debt financing and preferred equity
financing, if available, may involve agreements that include restrictive
covenants limiting or restricting our ability to take specific actions, such as
incurring additional debt, making capital expenditures or declaring dividends,
that could adversely impact our ability to conduct our business. If we raise
additional funds through other sources, such as collaboration agreements,
strategic alliances, licensing arrangements or marketing and distribution
arrangements, we may have to relinquish valuable rights to our technologies,
future revenue streams, product development, and

                                       30
--------------------------------------------------------------------------------


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 when needed, we
may be required to delay, limit, reduce, or terminate our product development or
future commercialization efforts or grant rights to develop and market products
or product candidates that we would otherwise prefer to develop and market
ourselves.

Contractual obligations and commitments

The following is a summary of our contractual obligations and commitments as of
June 30, 2022:

                                              PAYMENTS DUE BY PERIOD
                                                  (in thousands)
                                              LESS THAN      1 TO 3       3 TO 5
                                  TOTAL        1 YEAR         YEARS       YEARS

Operating lease obligation (1) $2,495 $575 $1,195 $

  724
Total                            $ 2,495     $       575     $ 1,195     $    724



(1)

Represents future minimum lease payments under our operating lease for offices and laboratories at our Needham, Mass. ease.

We also enter into contracts in the normal course of business with hospitals,
clinics, universities, and other third parties for clinical trials and testing
and with construction contractors and process developers for the construction of
our manufacturing facility. These contracts do not contain minimum purchase
commitments and are cancelable by us upon prior written notice. Payments due
upon cancelation consist only of payments for services provided or expenses
incurred, including noncancelable obligations of our service providers, up to
the date of cancelation. These payments are not included in the table above as
the amount and timing of such payments are not known.

Critical accounting estimates

Our management's discussion and analysis of financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The
preparation of our financial statements and related disclosures requires us to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, costs and expenses, and the disclosure of contingent assets and
liabilities in our financial statements. These items are monitored and analyzed
by us for changes in facts and circumstances, and material changes in these
estimates could occur in the future. We base our estimates on historical
experience, known trends and events, and on various other factors that we
believe are 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. We evaluate our estimates and
assumptions on an ongoing basis. Our actual results may materially differ from
these estimates under different assumptions or conditions.

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

Accumulated research and development costs

As part of the process of preparing our financial statements, we are required to
estimate our accrued research and development expenses. This process involves
reviewing open contracts and purchase orders, communicating with our personnel
to identify services that have been performed on our behalf, and estimating the
level of service performed and the associated costs incurred for the services
when we have not yet been invoiced or otherwise notified of the actual costs.
Most of our service providers invoice us in arrears for services performed, on a
pre-determined schedule or when contractual milestones are met; however, some
require advance payments. We make estimates of our accrued expenses as of each
balance sheet date in our financial statements based on facts and circumstances
known to us at that time. We periodically confirm the accuracy of these
estimates with the service providers and make adjustments, if necessary.
Examples of estimated accrued research and development expenses include fees
paid to the following:

?

clinical trial sites where patients are treated with our product candidates; and

?

consultants providing services relating to process development, regulatory and other services.

?

CMO who manufacture commercial scale quantities of our product candidates

Actual services performed may vary from our estimates, resulting in adjustments
to research and development costs or inventories in future periods. Changes in
these estimates that result in material changes to our accruals could materially
affect our results of operations.

                                       31
--------------------------------------------------------------------------------

Determination of the fair value of warrants

In connection with the Series B convertible preferred stock issuance in November
2018, the Company issued warrants to purchase shares of common stock of which
certain warrants are shown as a liability on the balance sheet. The fair value
of the warrants was determined based on significant inputs not observable in the
market. The fair value of the warrants uses various valuation methods, including
the Monte Carlo method, the option-pricing method, probability-weighted expected
return and the hybrid method, all of which incorporate assumptions and
estimates, to value the common stock warrants. The hybrid method is often used
when a company is expecting a liquidity event in the near future and is a
combination of the option-pricing and probability-weighted expected return
methods. Estimates and assumptions impacting the fair value measurement include
the fair value per share of the underlying shares of common stock prior to the
IPO, risk-free interest rate, expected dividend yield, expected volatility of
the price of the underlying preferred stock, and the remaining contractual term
of the warrants. The most significant assumption in the model impacting the fair
value of the common stock warrants is the fair value of the Company's common
stock as of each remeasurement date. Prior to the IPO, the Company determined
the fair value per share of the underlying common stock by taking into
consideration the most recent sales of preferred stock, results obtained from
third-party valuations and additional factors that were deemed relevant.

Stock-based compensation

We measure stock options and other stock-based awards granted to our employees,
directors, consultants, advisors based on the fair value on the date of the
grant, awards, net of actual forfeitures, over the requisite service period,
which is generally the vesting period of the respective award. For stock-based
awards granted to non-employees, compensation expense is recognized over the
vesting period which approximates the period over which services are rendered by
such non-employees.

We estimate the fair value of each stock option grant on the date of grant using
the Black-Scholes option-pricing model, which uses as inputs the fair value of
our common stock and assumptions we make for the expected volatility of our
common stock, the expected term of our stock options, the risk-free interest
rate for a period that approximates the expected term of our stock options, and
our expected dividend yield.

Determination of the fair value of common shares

Prior to the IPO, there had been no public market for our common stock and as
such, the estimated fair value of our common stock had been determined by our
board of directors as of the date of each option grant, with input from
management, taking into consideration our most recently available third-party
valuations of common stock at the time of the grants, as well as our board of
directors' assessment of additional objective and subjective factors that it
believed were relevant and which may have changed from the date of the most
recent valuation through the date of the grant. Third-party valuations, or
valuation reports, were performed in accordance with the guidance outlined in
the American Institute of Certified Public Accountants' Accounting and Valuation
Guide, Valuation of Privately-Held-Company Equity Securities Issued as
Compensation.

For the December 1, 2020, January 1, 2021, and June 15, 2021 third-party
prepared valuation reports, a probability-weighted expected return method was
used to determine the fair value of the common stock. The present value of the
common stock under each of these three identified scenarios was weighted based
on the probability of each scenario occurring to determine the value of the
common stock. These third-party valuations resulted in a valuation of our common
stock of $3.96, $4.97 and $6.64 per share as of December 1, 2020, January 1,
2021 and June 15, 2021, respectively.

In addition to considering the results of the valuation reports, our board of
directors considered various objective and subjective factors to determine the
fair value of our common stock as of each grant date, including:

?

the prices at which we sold convertible preferred shares and the superior rights and preferences of convertible preferred shares over our common shares at the time of each grant;

?

the progress of our research and development programs, including the status and results of preclinical studies and clinical trials for our product candidates;

?

our stage of development and commercialization and our business strategy;

?

external market conditions affecting the biotechnology industry and trends within such industry;

?

our financial condition, including cash, and our historical and anticipated operating performance and results;

?

the absence of an active public market for our common stock and convertible preferred stock;

?

the likelihood of a liquidity event, such as an initial public offering or sale of our company, taking into account prevailing market conditions; and

?

analysis of initial public offerings and stock market performance of similar companies in the biotechnology sector.

The assumptions underlying these valuations were highly complex and subjective
and represented management's best estimates, which involved inherent
uncertainties and the application of management's judgment. As a result, if we
had used

                                       32
--------------------------------------------------------------------------------

different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could be materially different.

Subsequent to the IPO, a public trading market for our common stock has been
established and it is no longer necessary for our board of directors to estimate
the fair value of our common stock in connection with our accounting for granted
stock options and other such awards we may grant, as the fair value of our
common stock is determined based on the quoted market price of our common stock.

Recent accounting statements

A description of recent accounting pronouncements that may potentially impact
our financial position, results of operations, or cash flows is disclosed in
Note 2 to our condensed consolidated financial statements included elsewhere in
this Form 10-Q.

Emerging Growth Business Status

In April 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act,
was enacted. Section 107 of the JOBS Act provides that an "emerging growth
company," or an EGC, can take advantage of the extended transition period
provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the
Securities Act, for complying with new or revised accounting standards. Thus, an
EGC can delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. We have elected to use the extended
transition period for new or revised accounting standards during the period in
which we remain an emerging growth company; however, we may adopt certain new or
revised accounting standards early.

We will remain an emerging growth company until the earliest to occur of: (1)
the last day of the fiscal year in which we have more than $1.07 billion in
annual revenue; (2) the date we qualify as a "large accelerated filer," with at
least $700.0 million of equity securities held by non-affiliates; (3) the date
on which we have issued more than $1.0 billion in non-convertible debt
securities during the prior three-year period; and (4) December 31, 2026.

                                       33

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