Liquidity and management's plans

3 Months Ended

Mar. 31, 2020

2.	Liquidity and management’s plans:

The Company had cash and cash equivalents of approximately $0.3 million as of March 31, 2020.

Based on the Company’s current operational plan and budget, and taking into account the recent reduction in the Company’s salary obligations, as described in Note 6, the Company expects that it has sufficient cash to manage its business into the third quarter of 2020, although this estimation assumes the Company does not begin any clinical trials, acquire other drug development opportunities or otherwise face unexpected events, costs or contingencies, any of which could affect the Company’s cash requirements. Available resources may be consumed more rapidly than anticipated, resulting in the need for additional funding. The Company intends to finance additional research and development, commercialization and distribution efforts and its working capital needs primarily through:

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proceeds from public and private financings and, potentially, from other strategic transactions (including potential royalty-related financing transactions);

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royalty revenue from Mayne Pharma from sales of SUBA-Itraconazole BCCNS upon and assuming approval by FDA (after earned royalties have been applied to any royalties advanced under Third Amended SLA, although it is uncertain if and when such FDA approval will be obtained);

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proceeds from the exercise of outstanding warrants previously issued in private financings to investors;

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potential partnerships with other pharmaceutical companies to assist in the supply, manufacturing and distribution of our products for which we would expect to receive upfront milestone and royalty payments;

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potential licensing and joint venture arrangements with third parties, including other pharmaceutical companies where we would receive funding based on

out-licensing

our product; and

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government or private foundation grants or loans which would be awarded to us to further develop our current and future therapies, or government payroll protection or similar programs available as a result of the novel coronavirus outbreak.

However, there is a risk that none of these plans will be implemented in a manner necessary to sustain the Company for an extended period of time and that the Company will be unable to obtain additional financing when needed on commercially reasonable terms, if at all. In particular, the Company is presently subject to shareholder litigation (see Note 5 – Legal Proceedings). The existence of the Action and the Class Action (as defined below) and the uncertainty surrounding their outcome has impeded the Company’s ability to secure additional funding and may continue to do so for so long as the outcome of the Action and the Class Action is uncertain. While the Company believes the Company may have further clarity on the Action during the third quarter of 2020 when the court in which the Action is pending is anticipated to rule on the defendants’ motion to dismiss, such ruling may be adverse to the defendants or create additional uncertainties or may be further delayed due to the novel coronavirus outbreak, which could continue to hamper the Company’s ability to raise capital. If adequate funds are not available when needed, the Company may be required to significantly reduce or refocus operations or to obtain funds through arrangements that may require the Company to relinquish rights to technologies or potential markets, any of which could have a material adverse effect on the Company. In addition, on January 30, 2020, the International Health Regulations Emergency Committee of the World Health Organization (“WHO”) declared the novel coronavirus outbreak a public health emergency of international concern and on March 12, 2020 the WHO announced the outbreak was a pandemic. On January 31, 2020 the U.S. Health and Human Services Secretary declared a public health emergency, and subsequently state and local governments have imposed various restrictions on public activity. The Company has maintained operations virtually during the outbreak, but the impact of the outbreak currently is unknown and rapidly evolving. The related health crisis has adversely affected the U.S. and global economy, resulting in an economic downturn that has impacted the financial markets and the Company’s ability to raise capital.

As a result of the foregoing circumstances, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements included herein do not include any adjustments relating to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.