ORPN Bioblast Pharma Ltd. - Ordinary Shares

Our historical financial statements are prepared in accordance with generally accepted accounting principles in the United States and are presented in U.S. dollars. The following summary consolidated financial data for the years ended December 31, 2017, 2016 and 2015 and as of December 31, 2017 and 2016 are derived from, and should be read in conjunction with, the audited consolidated financial statements, and notes thereto, appearing elsewhere in this annual report. The summary consolidated financial for the years ended December 31, 2014 and 2013 and as of December 31, 2015, 2014 and 2013 have been derived from audited financial statements not included in this annual report.

The information presented below is qualified by the more detailed historical financial statements set forth in this annual report, and should be read in conjunction with those financial statements, the notes thereto and the discussion under Item 5 - “Operating and Financial Review and Prospects.”

Balance Sheet Data - December 31,

U.S. dollars in thousands

Not applicable.

Not applicable.

Investing in our Ordinary Shares involves a high degree of risk. You should carefully consider the risks described below before investing in our Ordinary Shares.

Our business, operating results and financial condition could be seriously harmed due to any of the following risks, among others.  If we do not successfully address the risks to which we are subject, we could experience a material adverse effect on our business, results of operations and financial condition and our share price may decline.  We cannot assure you that we will successfully address any of these risks.

Risks Related to Our Financial Position and Capital Resources

We are currently seeking business development and M&A opportunities. There is intense competition for businesses/products suitable for a transaction of the type we are contemplating.

There is currently a very competitive market for business opportunities, which could reduce the likelihood of consummating a successful transaction for acquisition of a business or technology. We anticipate that we will be a small participant in the pharmaceuticals M&A or joint ventures market with, or in the acquisition of, small private entities. A large number of established and well-financed entities, including small public companies, venture capital firms, and special purpose acquisition companies are active in M&A of companies that may be desirable target candidates for us. We have significantly less financial resources, technical expertise and managerial capabilities than many of these entities, and we may be unable to effectively compete with such entities in identifying possible business opportunities and successfully completing a transaction. These and other competitive factors may reduce the likelihood of our identifying and consummating a successful transaction.

We may not be able to enter into a transaction of the type contemplated and if we complete such a transaction, we may need to raise additional capital.

Even if we identify a successful target for a transaction, there can be no assurance that we (or the entity with which we combine) will be able to complete any such transaction. If we are not able to complete such a transaction, for whatever reason, we might not be able to continue as a going concern. If we cannot continue as a going concern, our investors may lose almost all or their entire investment. In the event that we complete such a transaction, we may need to raise substantial additional capital. In such event, we may need to rely on external sources of financing to meet any capital requirements and to obtain such funding through the debt and equity markets. We cannot provide any assurances regarding the availability of any such additional funding and, if available, regarding the terms thereof. If we fail to obtain such necessary funding, any such transaction may not be successful.

Potential acquisitions of or investments in companies or technologies may negatively impact our financial condition and may not yield the expected returns.

Even if we are able to make an acquisition or investment on reasonable terms, we have no prior experience in successfully completing acquisitions, and we could experience difficulties combining the two companies and/or in retaining and motivating key personnel from these businesses. We may also incur unanticipated liabilities. We cannot be certain that our actual cash requirements resulting from an acquisition, business combination or investment will not be greater than anticipated. Furthermore, there can be no assurance that we will be able to realize the anticipated benefits or synergies of any such acquisition, combination or investment. In that regard, we note that should we combine with, or invest in, any entity that is in the developmental stage, such as we were when we first went public, the ultimate success of such business will depend, in large part, on the combined company’s ability to be successful with clinical trials and in obtaining any required regulatory approvals.

Our Board of Directors has sole discretion to identify and evaluate transaction candidates and in some cases to complete such transactions without approval of our shareholders.

We are not obligated to follow any particular operating, financial, geographic or other criteria in evaluating candidates for a potential transaction. We will choose a technology or business that we believe will provide an opportunity for our shareholders potentially to receive long-term financial returns if the transaction is successful and our board will determine the purchase price and other terms and conditions of such transaction. Accordingly, there can be no assurance that any such transaction would be subject to shareholder review or approval. As a general matter, under Israeli law, there is no requirement for us to have an acquisition approved by our shareholders. Furthermore, under the Nasdaq Listing Rules, our status as a foreign private issuer enables us to take advantage of certain exemptions regarding Nasdaq Listing Rules, such as the Nasdaq shareholder approval requirement for an acquisition in which we would issue more than 20% of our existing share capital.

Raising additional capital, or issuance of our Ordinary Shares as consideration in a merger or acquisition transaction would cause dilution to our existing shareholders, and may restrict our operations or require us to relinquish rights.

We have in the past and may continue to seek additional capital through a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing arrangements. We may also in the future issue substantial number of our Ordinary Shares as consideration in connection with merger and acquisition transactions. To the extent that we raise additional capital through the sale of equity or convertible notes securities, or the issuance of securities as part of a merger and acquisition transaction your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licenses on terms that are not favorable to us.

We are a development-stage company and have a limited operating history on which to assess our business, we have incurred significant losses since our inception, and anticipate that we will continue to incur significant losses for the foreseeable future.

We are a development-stage biotechnological company with a limited operating history. We have incurred net losses since our inception in January 2012, including a net loss of $5.9 million for the year ended December 31, 2017. As of December 31, 2017, we had an accumulated deficit of $45.8 million.

Until we began our strategic process with JSB-Partners, we had devoted substantially all of our financial resources to identify, acquire, license, and develop our current product candidate, including conducting nonclinical and clinical trials and providing general and administrative support for these operations. To date, we have financed our operations primarily through the sale of equity securities. The amount of our future net losses will depend, in part, on the rate of our future expenditures. Biotechnological product development is a highly speculative undertaking and involves a substantial degree of risk. We are in Phase 2 development of Trehalose IV, which is the only product candidate that we have pursued. It may be several years, if ever, before we have this product candidate and/or any future product candidates that we may pursue approved for commercialization. Even if we obtain regulatory approval to market a product candidate, our future revenue will depend upon the size of any markets in which our product candidates may receive approval, and our ability to achieve sufficient market acceptance, pricing, reimbursement from third-party payers, and adequate market share for our current or future product candidates in those markets.

We have incurred continuing losses, and depend on outside financing resources to continue our activities. On August 5, 2014, we completed a successful initial public offering that raised net proceeds of approximately $31.4 million, and in March 2016 we completed a net $6.1 million registered direct offering of our Ordinary Shares and a private placement of warrants to purchase additional Ordinary Shares. In the opinion of our management and based on our current plans and search for business development and M&A opportunities , our balances of cash and cash equivalents including short-term bank deposits will enable us to fund our activities at least until after the end of the third quarter of 2018. However, the actual amount of cash we will need to fund our operations is subject to many factors, including, but not limited to, the timing, design and execution of the clinical trials of our existing drug candidate, any future projects which may be in-licensed or any other business development activities. For example, changing circumstances and/or acquisition of new technologies may cause us to consume capital significantly faster than management currently anticipates and we may need to spend more money than currently expected because of, among others, circumstances beyond our control. Should we be unable to obtain additional funding required, we may reduce our activities until we have sufficient funds to continue.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:

Further, the net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance.

The report of our independent registered public accounting firm contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern.

The report of our independent registered public accounting firm on our audited financial statements as of and for the year ended December 31, 2017 contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of the uncertainty regarding our ability to continue as a going concern. This going concern opinion could materially limit our ability to raise additional funds through the issuance of equity or debt securities or otherwise. Further reports on our financial statements may include an explanatory paragraph with respect to our ability to continue as a going concern. If we cannot continue as a going concern, our investors may lose their entire investment.

We have not generated any revenue from any commercial products and may never be profitable.

Our ability to become profitable depends upon our ability to generate revenue. Unless and until marketing approval is obtained from either the FDA (to market and sell Trehalose IV in the United States), the European Medicines Agency, or EMA, (to market and sell Trehalose IV in the European Union), or any comparable foreign agency for Trehalose IV or any future product candidates we may develop, we may not be able to generate any revenue or attain profitability. In addition, our ability to generate profits after any regulatory approval of our current or future product candidates is subject to our ability to contract for the manufacture of commercial quantities of our product candidates at acceptable cost levels and establish sales and marketing capabilities or identify and enter into one or more strategic collaborations to effectively market and sell any approved product candidates.

Even if Trehalose IV or any future product candidate is approved for commercial sale, any approved therapeutic may not gain market acceptance or achieve commercial success, and such commercialization could come with significant costs. If we are unable to generate product revenues, we will not become profitable and may be unable to continue operations without continued funding.

We have a limited operating history and no history of commercializing drugs, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

We commenced operations in 2012, and our operations to date have been largely focused on raising capital and developing Trehalose IV, including undertaking nonclinical studies and conducting clinical trials. Trehalose IV is the only product candidate that we are currently pursing. We have not yet demonstrated our ability to successfully complete additional later-stage clinical trials, obtain FDA or other regulatory approvals, manufacture a commercial-scale drug or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization.

Consequently, we may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives. We will need to transition at some point from a company with a development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

Risks Related to Development, Regulatory Approval and Commercialization of Trehalose IV and any Future Product Candidates

If we do not pursue an M&A transaction, or other business development opportunities, we will be entirely dependent on the success of Trehalose IV, which is in the early stages of clinical development. We cannot give any assurance that Trehalose IV or any future product candidate will receive regulatory approval, which is necessary before they can be commercialized.

We are a biotechnology company with no products approved by regulatory authorities or available for commercial sale, and have never submitted a product for approval to the FDA or comparable foreign regulatory authorities. Our future success is dependent on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize Trehalose IV.

In the past we focused, and we expect in the future to focus our business on the development of Trehalose IV, which is in the early stages of development. Trehalose IV will require additional non-clinical and clinical development, management of nonclinical, clinical, and manufacturing activities, regulatory approval, obtaining adequate manufacturing supply, building of a commercial organization, and significant marketing efforts before we generate any revenue from product sales. We completed two Phase 2a clinical trials of Trehalose IV in two indications. We are not permitted to market or promote any of our current or any future product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates, including Trehalose IV. We may also receive regulatory approval in some jurisdictions, but not others. We cannot be certain that Trehalose IV will be successful in clinical trials or receive regulatory approval. Further, Trehalose IV may not receive regulatory approval, even if it is successful in clinical trials. If we do not receive regulatory approvals for any product candidates we attempt to develop, we are not likely to be able to continue our operations.

In the future, we generally plan to seek regulatory approval to commercialize Trehalose IV in the United States, Canada, the European Union, and in additional foreign countries where we have commercial rights. To obtain regulatory approval in other countries, we must comply with numerous and varying regulatory requirements of such other countries regarding safety, efficacy, chemistry, manufacturing and controls, clinical trials, commercial sales, pricing, and distribution of the product candidates we may attempt to commercialize. Even if we are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdictions, and as such our revenues and results of operations could be negatively affected.

The drug development and regulatory approval processes of the FDA and comparable foreign regulatory authorities are comprehensive and therefore are likely to be lengthy and expensive. If we are ultimately unable to obtain regulatory approval for our current or future product candidates, our business will be substantially harmed.

The time required to obtain approval by the FDA and comparable foreign regulatory authorities is expensive, typically takes many years following the commencement of early stage clinical trials, and depends upon numerous factors. We have not obtained regulatory approval for our sole product candidate.

In addition, even if we obtain regulatory approvals, the timing or scope of any approvals may prohibit or reduce our ability to commercialize Trehalose IV successfully. For example, if the approval process takes too long, we may miss market opportunities and give other companies the ability to develop competing products or establish market dominance. Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render Trehalose IV not commercially viable. Further, regulatory authorities may approve Trehalose IV for fewer or more limited indications than we request, may limit approved usage to narrower patient populations, may grant approval contingent on the performance of costly post- marketing clinical trials, or may approve Trehalose IV with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that indication. Any of the foregoing scenarios could harm the commercial prospects for Trehalose IV and our business.

Delays in the initiation of the planned Phase 2b clinical trial of Trehalose IV in OPMD and the clinical trials for other indications, or any future clinical trials we intend to conduct for other product candidates we may develop, or negative findings in those trials, could significantly affect our product development costs or our ability to commercialize Trehalose IV. We do not know whether future trials will begin or whether all of our planned clinical trials, will be completed on schedule, if at all, or will be successful. Product development costs for Trehalose IV for OPMD or any other future indications we may pursue or for product candidates we may develop in the future will increase if we have delays in testing or approval, if we need to perform more or larger clinical studies than planned or if we have delays in adding new clinical trial sites.

The success of Trehalose IV and/or any other future product candidates that we may pursue, will depend on the receipt and maintenance of regulatory approval and the issuance and maintenance of such approvals is uncertain and subject to a number of risks, including the following:

These factors that can cause, or lead to, termination or suspension of, or a delay in the commencement or completion of clinical trials may also ultimately lead to the denial or even withdrawal of regulatory approval of Trehalose IV for OPMD, SCA3 and any other indication.

We have no experience in filing the applications necessary to gain regulatory approvals and have relied before and expect to continue to rely on consultants and third-party contract research organizations, or CROs, with expertise in this area to assist us in this process. Securing FDA and other comparable regulatory approval requires the submission of extensive nonclinical and clinical data, information about product manufacturing processes and inspection of facilities and supporting information to the FDA for each therapeutic indication to establish a product candidate’s safety and efficacy for each indication and manufacturing quality.

In addition, regulatory approval obtained in one jurisdiction does not necessarily mean that a product candidate will receive regulatory approval in all jurisdictions in which we may seek approval, but the failure to obtain approval in one jurisdiction may negatively impact our ability to seek approval in a different jurisdiction. The inability to meet the continuously evolving regulatory standards for approval may result in our failing to obtain regulatory approval to market our current product candidate or any other one we may develop in the future, which would significantly harm our business, results of operations, and prospects.

Positive results of clinical trials may be different from results of other clinical trials, and positive data from open-label clinical trials might not be replicated in subsequent open-label (open versus blinded) or placebo-controlled (controlled versus non-controlled) clinical trials.

Failure can occur at any time during the clinical trial process. The results of nonclinical trials and early clinical trials of any product candidate we may develop may not be predictive of the results of later-stage clinical trials. Product candidates that have shown promising results in early-stage clinical trials may still suffer significant setbacks in subsequent clinical trials. There is a high failure rate for drugs proceeding through clinical trials, and product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through nonclinical trials and initial clinical trials. A number of companies in the biotechnological industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Moreover, nonclinical and clinical data are often susceptible to varying interpretations and analyses. We do not know whether any Phase 2, Phase 3, or other clinical trials we may conduct will demonstrate consistent or adequate efficacy and safety sufficient to obtain regulatory approval to market our drug candidates.

On March 16, 2016, we reported the final results from our open - label HOPEMD Phase 2a clinical trial, on October 24, 2016 we reported the final results of a double-blind placebo-controlled pharmacokinetic study of Trehalose IV in healthy volunteers, and on September 12, 2016 we reported the results of the extension portion of HOPEMD Phase 2a trial. This trial relates to the treatment of patients suffering from OPMD, with our lead product candidate, Trehalose IV. These final results may not necessarily predict results from future trials. Results in our open - label HOPEMD Phase 2a clinical trial might not be repeated in later trials or may not be statistically significant, because, among other things, early stage trials are often conducted in smaller groups of patients than later trials, and without the same trial design features, such as randomized controls and blinding. If the results are not replicated in future trials or are not statistically significant, we might not be able to rationalize continued development of the product candidate, or substantiate our request to obtain approval from applicable regulatory authorities at a future time.

Changes in regulatory requirements and guidance may also occur and we may need to amend clinical trial protocols submitted to applicable regulatory authorities to reflect these changes. Amendments may require us to resubmit clinical trial protocols to IRBs or ethics committees for re-examination, which may impact the costs, timing or successful completion of a clinical trial.

The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of Trehalose IV and/or any future product candidates we may develop. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, clinical trials may be adversely effected, terminated, or disregarded. Additionally, we may lose any marketing approval that we may have obtained, and we may not achieve or sustain profitability, which would harm our business, prospects, financial condition and results of operations.

In the event that the FDA’s and/or other regulatory authorities’ policies change, we could be forced to conduct additional pre-clinical, clinical trials or other studies with respect to Trehalose IV or any future product candidates we may develop beyond those that we currently contemplate. Regardless of past results, if we are unable to successfully complete the additional requirements required by regulatory changes, we may be delayed in obtaining regulatory approval of Trehalose IV and any future product candidates we may develop, we may not be able to obtain regulatory approval at all or we may obtain approval of indications that are not as broad as intended. Moreover, due to potential regulatory changes, our product development costs may also increase if we experience delays in the additional testing or approvals required. As a result, we may not have sufficient funding to complete the testing and approval process for Trehalose IV or any future product candidates we may develop. Significant clinical trial delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our products if and when approved. If any of this occurs, our business would be harmed.

In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may require significant financial resources and may cause delays in the approval or the decision not to approve an application.

We may find it difficult to enroll patients in our clinical trials, in particular with respect to Trehalose IV and/or any future product candidates that we may pursue, which could delay or prevent clinical trials of Trehalose IV and any future product candidates we may develop and potentially harm our business.

Identifying and approving patients (those with required or desired characteristics to achieve diversity in a trial) to participate in clinical trials of Trehalose IV and any future product candidates we may develop in the future is critical to our success. When we initiate our clinical trials, the timing thereof will depend on the speed at which we can recruit patients to participate in testing Trehalose IV and any future product candidates we may develop as well as completion of required follow-up periods. If patients are unable or unwilling to participate in our clinical trials for any reason, the timeline for recruiting patients, conducting studies and obtaining regulatory approval of Trehalose IV and any future product candidates we may develop may be delayed. These delays could result in increased costs, delays in advancing Trehalose IV or any of our future product candidates, delays in testing the safety and effectiveness of our product candidates or termination of the clinical trials altogether, any of which would have an adverse effect on our business.

In particular, the conditions for which we currently plan to evaluate Trehalose IV are orphan diseases, which consist of limited patient populations from which to draw for clinical trials. Patient enrollment is affected by factors including:

We could encounter delays in recruitment for clinical trials if physicians and healthcare providers encounter unresolved ethical issues associated with enrolling patients in clinical trials of Trehalose IV and any future product candidates we may develop. We may not be able to initiate or continue clinical trials if we cannot enroll a sufficient number of eligible patients to participate in the clinical trials. Our ability to successfully initiate, enroll and complete a clinical trial in any foreign country is subject to numerous risks unique to conducting business in foreign countries, including:

Trehalose IV and/or any future product candidates that we may pursue may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

Undesirable side effects caused by Trehalose IV, our only current product candidate, could cause us or regulatory authorities to interrupt, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Patients enrolled in our trials of Trehalose IV for OPMD and other indications, may suffer side effects associated with the use of our Trehalose IV. Results of our trials could reveal a high and unacceptable severity and prevalence of side effects. In such an event, our trials could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny or withdraw approval of our product candidates for any or all targeted indications.

Any drug-related side effects could affect patient recruitment, the ability of enrolled patients to complete the trial, and/or result in potential product liability claims.

Additionally, if Trehalose IV or any other product candidate we may choose to develop receives marketing approval, and we or others later identify undesirable side effects caused by such products (even when used or tested for other indications, patient populations or other countries), or if a patient suffers a serious complication, including death, with respect to one of our products, a number of potentially significant negative consequences could result, including but not limited to:

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations, and prospects.

Even if we receive regulatory approval of Trehalose IV, we may still face future development and regulatory challenges that could inhibit or preclude our ability to commercialize Trehalose IV for any indication.

If we continue to develop Trehalose IV and it is approved, they will be subject to ongoing regulatory requirements for manufacturing and quality, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing trials, and submission of safety, efficacy, and other post-market information, including both federal and state requirements in the United States and in other foreign jurisdictions. In addition, manufacturers, manufacturers’ facilities, shippers and distributors are required to comply with extensive FDA and other international regulatory regulations, including ensuring that quality control and manufacturing procedures conform to current Good Manufacturing Practices, or cGMP. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any approved New Drug Application, or NDA, Marketing Authorization Application, or MAA. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, shipping storage and quality control.

Any regulatory approvals that we receive for Trehalose IV may be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate, including pharmacovigilance data collection. We will also be required to routinely report adverse reactions and production problems, if any, to the FDA and other international regulatory agencies, and to comply with requirements concerning advertising and promotion for our products. The FDA or comparable foreign regulatory authorities could require a special warning on the label, such as a Black Box Warning, which could significantly affect marketing and promotional efforts. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. As such, we may not promote Trehalose IV and/or any future product candidates that we may pursue for indications or uses for which they do not have regulatory approval. The holder of an approved NDA, MAA or BLA must also submit new or supplemental applications and variations and obtain FDA and other regulatory authority approval for certain changes to product labeling or manufacturing processes. We could also be asked to conduct post-marketing clinical trials to verify the safety and efficacy of our products in general or in specific patient subsets. If original marketing approval were to be obtained for our products via the accelerated or conditional approval pathways, we could be required to conduct a post-marketing confirmatory clinical trial. A post-marketing trial that fails to confirm the clinical benefit or failure to complete such a trial could result in the withdrawal of marketing approval and, thus, cessation of marketing and sales of the product.

If we or a regulatory agency discovers previously unknown problems such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, such regulatory agency may impose restrictions on that product or us. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other actions:

Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. Any failure by us or our partners to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our products. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.

We may face substantial competition from other companies with considerable resources that may already have products available in the market, and they or others may also discover, develop or commercialize additional products before or more successfully than we do.

Our industry is highly competitive and subject to rapid and significant technological change as researchers learn more about diseases and develop new technologies and treatments. Our potential competitors include primarily large pharmaceutical, biotechnology and specialty pharmaceutical companies. In attempting to achieve the widespread commercialization of Trehalose IV, we will face competition from established drug companies or generic versions of these products. Key competitive factors affecting the commercial success of Trehalose IV and any other product candidates we may develop are likely to be efficacy, safety and tolerability profile, reliability, convenience of administration, price and reimbursement and effectiveness of our promotional activities. Competition could also force us to lower prices or could result in reduced sales with other, more well-known or effective products or by selling their product at a lower price.

Our existing or potential competitors may have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of current or future product candidates we may develop, obtaining FDA and other regulatory approvals of products and the commercialization of those products. These companies may also have long-established relationships within the medical and patient community, including patients, physicians, nurses and commercial third-party payors and government payors. Our ability to compete successfully will depend largely on our ability to:

Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a small number of our competitors. Accordingly, our competitors may be more successful than we may be in obtaining FDA or other regulatory agency approvals of drugs and achieving widespread market acceptance. Our competitors’ drugs may be more effective, or more effectively marketed and sold, than any drug we may commercialize and may render Trehalose IV or any future product candidates we may develop obsolete or non-competitive before we can recover the expenses of developing and commercializing Trehalose IV or any future product candidates we may develop.

In addition, if one or more clinical trials are delayed, not only could our competitors be able to bring products to market before we do, and significantly reduce the commercial viability of Trehalose IV, but any trial delays could also shorten any periods during which our products have patent protection. Such delays may allow our competitors to bring products to market before we do, which could impair our ability to obtain orphan exclusivity and to successfully commercialize our current or future product candidates and may harm our business and results of operations.

We anticipate that we will face intense and increasing competition as new drugs enter the market and more advanced technologies become available. If we are unable to compete effectively, our opportunity to generate revenue from the sale of Trehalose IV or any future product candidates we may develop, if approved, could be impaired.

The number of patients suffering from OPMD and SCA3 is small and has yet to be established with precision. Our assumptions and estimates regarding prevalence may be wrong. If our Trehalose IV product candidate is approved for sale, and the actual number of patients in the applicable market is smaller than we estimate, our revenue could be adversely affected, possibly materially.

We target indications that are rare or ultra-rare diseases. Based on our own market research, in the United States and Canada there are approximately 4,300 patients with OPMD, our target indication. Similarly, there are a small number of individuals with SCA3, also known as Machado Joseph disease. However, there is no guarantee that these estimates are correct. The ultimate number of patients with OPMD and SCA3, in particular the number of patients for whom our Trehalose IV solution, if approved, is approved for use, could actually be significantly fewer than these estimates.

If the total addressable market for our products is smaller than we estimate, our revenue could be adversely affected, possibly materially.

Even if we receive regulatory approval of Trehalose IV, it may not achieve an adequate level of government price authorization or acceptance by physicians, patients and third-party payors and government payors, and we may not generate sufficient revenue or be able to achieve or sustain profitability.

Even if we receive regulatory approvals of Trehalose IV, its commercial success will depend in large part on the willingness of private and government payers to reimburse for its use at an appropriate price and for physicians to prescribe Trehalose IV to their patients. In order to achieve an acceptable level of prescriptions for Trehalose IV, we must be able to meet the needs of payors, the medical community and patients with respect to cost, efficacy, safety and other factors, including, but not limited to the following:

Even if Trehalose IV is approved, it may not achieve an adequate level of acceptance by physicians, healthcare payors and patients, and we may not generate sufficient revenue or be able to achieve or sustain profitability. Our efforts to educate the medical community, patients, governments and private payors on the benefits of Trehalose IV to achieve an adequate level of their acceptance may require significant resources and may never be successful.

The manufacture and packaging of our current and any future product candidates that we may pursue are subject to FDA requirements and those of similar foreign regulatory bodies. If we or our third-party manufacturers fail to satisfy these requirements, our product development and commercialization efforts may be harmed.

The manufacture and packaging of pharmaceutical products, such as trehalose dyhidrate, our active pharmaceutical ingredient, or API, and our Trehalose IV solution, if approved, are regulated by the FDA and similar foreign regulatory bodies and must be conducted in accordance with the FDA’s cGMP and comparable requirements of foreign regulatory bodies. In order to comply with these requirements, we may be required to perform additional development work, including, but not limited to changes or additions to the manufacturing process and increased quality controls. Failure by us or our third-party manufacturers to comply with applicable regulations or requirements could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our products, delays, suspension or withdrawal of approvals, seizures or voluntary recalls of product, operating restrictions and criminal prosecutions, any of which could harm our business.

Should Trehalose IV solution or any future product that we may pursue be approved to market in the United States, post approval changes in the manufacturing process or procedure may require FDA review and approval. Changes include, but are not limited to, changes in the location where the product is manufactured, the manufacturing process, or the identity of a third-party manufacturer. The FDA ensures that the change does not compromise the quality of the product. Any new facility is subject to an inspection by the FDA and would require us to demonstrate product comparability to the FDA. There are comparable foreign requirements. This review may be costly and time consuming and could delay or prevent the launch of a product. Moreover, the cost of manufacturing may be too high to sustain profitability or conduct clinical and nonclinical trials.

In order to obtain approval of our Trehalose IV and/or any future product candidates that we may pursue, we will be required to complete a process validation which is defined as the collection and evaluation of data, from the process design stage through commercial production, which establishes scientific evidence that a process is capable of consistently delivering quality product. Process validation involves a series of activities taking place over the lifecycle of the product and process. If the FDA does not consider the result of the process validation or required testing to be satisfactory, regulatory approval and/or commercial supply after launch may be delayed. The FDA and similar foreign regulatory bodies may also implement new requirements, or change their interpretation and enforcement of existing requirements, for manufacture, packaging or testing of products at any time. If we are unable to comply, we may be subject to regulatory, civil actions or penalties which could harm our business.

Our relationships with patients, physicians, third-party payors and others will be subject to applicable state and federal anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians, and others will play a primary role in the recommendation and prescription of Trehalose IV and any future product candidates we may develop for which we obtain regulatory approval. Our operations may expose us to broadly applicable federal and state fraud and abuse, patient privacy, and other healthcare laws and regulations that may affect our business or financial arrangements and relationships through which we would market, sell and distribute our products. Restrictions under applicable federal and state healthcare laws and regulations that may affect our operations and expose us to areas of risk include the following:

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has strengthened these laws. For example, the Affordable Care Act, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. Moreover, the Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

Efforts to ensure that our business arrangements with third parties are compliant with applicable healthcare laws and regulations will involve the expenditure of appropriate, and possibly significant, resources. In addition, and with respect to dealings with governmental regulatory agencies, we cannot assure that our employees or independent contractors will not engage in prohibited conduct under the FCPA. If our operations are found to be in violation of any current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations, which could adversely affect our ability to operate our business and our results of operations. If any physicians or other healthcare providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs, which could adversely affect our ability to operate our business and our results of operations.

Unless we pursue an M&A transaction or other business development opportunities, the long-term growth of our business will depend on our efforts to leverage Trehalose IV to be used in other indications, which may require substantial financial resources and may ultimately be unsuccessful.

The long-term growth of our business will depend upon our ability to utilize our proprietary Trehalose IV as a platform to be used in other indications, aside from SCA3 and OPMD, which is something that we may never achieve or ever receive regulatory approval for. Research programs to identify new target indications for Trehalose IV require substantial technical, financial and human resources whether or not we ultimately identify any such applicable indication.

There are a number of FDA, EMA and other health authority requirements that we must satisfy before we can commence a clinical trial of Trehalose IV in other indications. If we are able to identify additional potential new indications, satisfaction of these regulatory requirements will entail substantial time, effort and financial resources. Any time, effort and financial resources we expend on development of other indications may impair our ability to continue development and commercialization of Trehalose IV for the treatment of OPMD and SCA3. As a result of such impairments, we may never commence clinical trials of such development programs despite expending significant resources in pursuit of their development. If we do commence clinical trials of other indications, these product candidates may never demonstrate sufficient safety and efficacy to be approved by the FDA or other regulatory authorities. If any of these events occur, we may be forced to abandon our development efforts for such program or programs, which could harm our business.

We may be unable to obtain orphan drug designation or exclusivity for the use of Trehalose IV for other indications. Even if we obtain orphan drug designation, we may not be able to capitalize on its benefits.

Our Trehalose IV solution has been granted orphan designation in the United States and the European Union for the treatment of OPMD and SCA3. Regulatory authorities in some jurisdictions, including the United States and the European Union, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, or the Orphan Drug Act, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as having a patient population of fewer than 200,000 individuals diagnosed annually in the United States. In the European Union, the European Commission, after reviewing the opinion of the EMA’s Committee for Orphan Medicinal Products, or COMP, grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the European Union. In the Health Canada proposal, a rare disease is described as a life-threatening, seriously debilitating, or serious chronic condition that only affects a very small number of patients, typically less than five in 10,000 persons.

Additionally, orphan drug designation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition when, without incentives, it is unlikely that sales of the drug would be sufficient to justify the necessary investment in developing the product candidate. Even if we request orphan drug designation for any future product candidates or other indications we may develop, there can be no assurances that the FDA or the European Commission will grant any of these product candidates such designation. Additionally, the orphan drug designation by the FDA of our current or any future product candidates we may develop as an orphan drug does not guarantee that the FDA will accelerate regulatory review of or ultimately approve that product candidate.

Generally, if a product candidate with an orphan drug designation subsequently receives the first marketing approval of the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the EMA or the FDA from approving another marketing application for the same drug and indication for that time period, except in limited circumstances. The applicable period is seven years in the United States and 10 years in Europe. The European exclusivity period can be reduced to six years if a product no longer meets the criteria for orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition.

Because the extent and scope of patent protection for our products may in some cases be limited, orphan drug designation is especially important for our products for which orphan drug designation may be available. For Trehalose IV, we plan to rely on the exclusivity period under the Orphan Drug Act to maintain a competitive position. If we do not obtain orphan drug exclusivity for Trehalose IV or any therapeutic candidate designated as an orphan drug but does not have broad patent protection, our competitors may then sell the same drug to treat the same condition sooner than if we had obtained orphan drug exclusivity and our revenue will be reduced.

Even though, we may have obtained orphan drug designation for Trehalose IV in the United States for the treatment of OPMD and SCA3, we may not successfully obtain orphan drug exclusivity. Any such exclusivity that we do obtain may not effectively protect the product candidate from competition because different drugs can be approved for the same condition and the same drugs can be approved for different indications and might then be used off-label in our approved indication. In the United States, even after an orphan drug is approved, the FDA can subsequently approve another drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. In addition, if our current or any future product candidate we may develop receives an orphan drug designation is approved for a particular indication or use within the rare disease or condition, the FDA may later approve the same drug for additional indications or uses within that rare disease or condition that are not protected by our exclusive approval. As a result, if our product is approved and receives orphan drug status, the FDA can still approve other drugs for use in treating the same indication or disease covered by our product, which could create a more competitive market for us.

We currently have no sales organization and a limited pre-commercial/marketing organization. If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our products that may be approved or cleared for marketing in the future, we may be unable to generate any revenue.

We currently do not have any products that are approved or cleared for marketing. In the event that Trehalose IV and/or any therapeutic candidate that we may pursue is approved or cleared for marketing, we may still be unable to generate revenue. Although our management has experience with selling other similar products in the past while employed at other companies, we as a company have no experience selling and marketing our current product candidate and we currently have no sales organization and limited pre-commercial/marketing organization. To successfully commercialize any products that may result from our development programs, we will need to develop these capabilities, either on our own or with others. If our current product candidate or any future product candidates receive regulatory approval, we intend to establish a sales and marketing organization with technical expertise and supporting distribution capabilities to commercialize our product candidates in major markets, which will be expensive, difficult, and time consuming. Any failure or delay in the development of our internal sales, marketing, and distribution capabilities would adversely impact the commercialization of our products. We would need to invest resources in this prior to regulatory approval, which may prove to be a waste if such approval cannot be obtained.

Further, given our lack of prior experience in marketing and selling biotechnological products, our initial estimate of the size of the required sales force may be materially inadequate when compared to the size of the sales force actually required to effectively commercialize our current and/or future product candidates. As such, we may be required to hire substantially more sales representatives to adequately support the commercialization of our current and/or future product candidates or we may incur excess costs as a result of hiring more sales representatives than necessary. With respect to certain geographical markets, we may enter into collaborations with other entities to utilize their local marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all. If our future collaborators do not commit sufficient resources to commercialize our future products, if any, and we are unable to develop the necessary marketing capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business. We may be competing with companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

While orphan drug products are typically sold at a high price relative to other medications, the market may not be receptive to high pricing of our products.

We currently have one product candidate and may develop additional product candidates to treat rare and ultra-rare diseases, a space where medications are usually sold at high prices compared with other medications. However, even if regulatory authorities approve any product candidates that we may develop, the market may not be receptive to, and it may be difficult for us to achieve, a per-patient per-year price high enough to allow us to realize a return on our investment.

The insurance coverage and reimbursement status of newly-approved products is uncertain. If we are able to obtain regulatory approval for our product candidates, failure to obtain or maintain adequate coverage and reimbursement for new or current products could limit our ability to market those products and decrease our ability to generate revenue.

Our target patient populations are small, and accordingly the pricing, coverage, and reimbursement of our current and/or future product candidates, if approved, must be adequate to support our commercial infrastructure. Our per-patient prices must be sufficient to recover our development and manufacturing costs and potentially achieve profitability. Accordingly, the availability and adequacy of coverage and reimbursement by governmental and private payers are essential for most patients to be able to afford potentially expensive treatments such as ours, assuming we are able to obtain regulatory approval for our products. If we are able to obtain regulatory approval, sales of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid for by health maintenance, managed care, pharmacy benefit, and similar healthcare management organizations, or reimbursed by government authorities, private health insurers, and other third-party payers. If coverage and reimbursement are not available, or are available only in limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a return on our investment.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the reimbursement rate that the payor will pay for the product. Moreover, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. In order to obtain coverage and reimbursement for any product that might obtain regulatory approval, we may need to provide supporting scientific, clinical and cost-effectiveness data relating to such product, which may be costly and difficult to obtain. Further, in the U.S., the Centers for Medicare and Medicaid Services, or CMS, and other third-party payors, frequently change product descriptors, coverage policies, product and service codes, payment methodologies and reimbursement rates. Private payers tend to follow the coverage reimbursement policies and payment limitations established by CMS to a substantial degree. It is difficult to predict what CMS or any other third-party payor will decide with respect to reimbursement for products such as ours, assuming we are able to obtain regulatory approval for our products, and any such policies or payment limitations may be subject to change in the future.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure on the pricing and usage of any product candidate we attempt to commercialize. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In general, the prices of medicines under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for medicinal products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for any product candidate that we may develop. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

Moreover, increasing efforts by government bodies and third-party payers in the United States and abroad to cap or reduce healthcare costs may cause both coverage and the level of reimbursement for newly approved products to be limited and, as a result, we may not obtain adequate payment or coverage for our current or any future product candidates. We expect to experience pricing pressures in connection with the sale of our current product candidate or any future product candidates, if we obtain regulatory approval, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes. In the U.S., changes in federal healthcare policy and reforms aimed at lowering healthcare costs were enacted through the Affordable Care Act in 2010 and some provisions are still being implemented. Some reforms and cost containment measures could result in reduced reimbursement rates for our product candidates, which would adversely affect our business strategy, operations and financial results. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.

Changes to healthcare and FDA laws, regulations and policies may have a material adverse effect on our business and results of operations.

United States

In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs and to modify the regulation of drug and biologic products. For example, the Affordable Care Act, as amended, substantially changed the way health care is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. The Affordable Care Act, among other things, subjects biologic products to potential competition by lower-cost biosimilars, addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increases the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations, and establishes annual fees and taxes on manufacturers of certain branded prescription drugs. Implementation of the Affordable Care Act remains ongoing, and there remains uncertainty as to how the law’s various provisions will ultimately affect the industry and whether the law will remain in place.

Other legislative changes have been adopted in the United States, including the Cures Act and the Budget Control Act of 2011, or the Budget Act, signed into law in 2011. The Cures Act introduced a wide range of reforms and the Budget Act, among other things, required reductions in federal spending, which eventually triggered Medicare sequestration—the requirement to reduce Medicare payments to providers up to 2% per fiscal year. In 2013, the 2% Medicare payment reductions were applied to fee-for-service claims with dates of service or dates of discharge on or after April 1, 2013. Sequestration was initially set to expire in fiscal year 2021 but has been extended to 2025.

We expect that additional state and federal healthcare reform measures and regulations could be adopted in the future, including proposals to reduce the exclusivity protections provided to already approved biological products and to provide biosimilar and interchangeable biologic products an easier path to approval. Any of these measures and regulations could limit the amounts that federal and state governments will pay for healthcare products and services, result in reduced demand for our product candidates or additional pricing pressures and affect our product development, testing, marketing approvals and post-market activities.

European Union

In the EU, the European Commission has adopted detailed rules for the safety features appearing on the packaging of medicinal products for human use. The regulations set forth the rules for the features appearing on the packaging of these medicinal products, including, among other things, the characteristics and technical specifications of the unique identifier that enables the authenticity of medicinal products to be verified and individual packs to be identified, the modalities for the verification of the safety features, and the list of medicinal products and product categories subject and not subject to prescription which shall not bear and bear (respectively) safety features.

The European Commission has also launched a series of public consultations that are aimed at the adoption of notices and guidelines which will serve the interpretation of currently applicable regulations and directives. For example, between August 2015 and December 2016, the European Commission launched public consultations which concerned good manufacturing practices, clinical trials for human medicinal products, and orphan medicinal products. The purpose of the consultation on orphan medicinal products (which will be replaced with a Notice) is to streamline the regulatory framework and to adapt the applicable regulations to technical progress. The consultation focuses on a variety of elements of Regulation (EC) No 141/2000, which include the encouragement of development of orphan medicinal products for communicable diseases and the simplification of the procedure for the reassessment of orphan criteria when two authorization application procedures are pending in parallel for two orphan medicinal products. If we are not able to adhere to the rules and guidelines of the European Commission and other EU regulatory bodies, our business might sustain adverse effects.

We may not be able to maintain our current product liability coverage, and, even if we do, our coverage may not be adequate to cover any or all liabilities that we may incur, which could decrease our cash and harm our business.

We currently have $10 million in product liability insurance coverage in the aggregate, which may not be adequate to cover any or all liabilities that we may incur. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. We intend to expand our product liability insurance coverage to include the sale of commercial products if we obtain marketing approval of Trehalose IV and any future product candidates we may develop, but we may be unable to obtain commercially reasonable product liability insurance for these product candidates, if approved for marketing. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our cash and harm our business, and in the extreme case, cause us to shut down. In addition, we may not be able to maintain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims, which could prevent or inhibit the commercial production and sale of our products.

Additionally, if any claims are brought against us, even if we are fully covered by insurance, we may suffer harm such as adverse publicity. We also could suffer diversion of attention of technical and management personnel and incur substantial costs in resolving disputes, including litigation, with our insurance provider regarding coverage.

Risks Related to our Reliance on Third Parties

We will rely in the future on third parties to conduct our nonclinical studies, clinical trials, drug product manufacturing and other research and development activities. If these third parties do not appropriately carry out their contractual duties, fail to conduct high-quality studies or meet expected deadlines, regulatory approval and commercialization of Trehalose IV or any future candidates we may develop could be delayed or not obtained at all.

We do not have the ability to conduct all of our clinical trials independently. We relied in the past and plan to rely on third parties, including clinical investigators, third-party CROs, labs and consultants, to monitor, manage and protect sensitive data for, and execute our ongoing nonclinical and planned clinical programs for Trehalose IV and other potential product candidates. We currently have only two employees, and will need to hire additional employees in order to identify and monitor our third-party providers. Nevertheless, as we did in the past, we plan to be responsible for ensuring that each of our nonclinical studies and clinical trials are conducted, not only in accordance with contractual obligations, but also in accordance with the applicable protocol and legal, regulatory and scientific requirements and standards, including, for example, Good Laboratory Practices, the Animal Welfare Act and Good Clinical Practices, or GCPs. In addition, we rely on their policies and standard operating procedures. In addition, we may be responsible for maintaining compliance with applicable federal and state regulations that impose requirements related to privacy and security of health information, including those promulgated pursuant to HIPAA. Our reliance on third parties does not relieve us of our regulatory responsibilities. Regulatory authorities enforce GCPs and other standards through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of these third parties fail to comply with applicable GCPs and other standards, the clinical data generated in our clinical trials may be deemed unreliable and the relevant regulatory authorities may require us to perform additional clinical trials in support of our regulatory approval applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements and other standards. Failure to comply with these regulations may require us to repeat nonclinical studies and clinical trials, which would delay the regulatory approval process. If the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our protocols, regulatory requirements or for other reasons, our nonclinical studies and clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval of or successfully commercialize Trehalose IV and any future product candidates we may develop. Additionally, we must ensure that our contracts with third parties are at an affordable price. As a result, our results of operations and the commercial prospects for our current and/or future product candidates could be harmed, our costs could increase and our ability to generate revenues could be delayed. To the extent we are unable to identify and successfully manage the performance of third-party service providers in the future, our business may be adversely affected.

We will rely completely on third parties to manufacture Trehalose IV. Our business could be harmed if those third parties fail to provide us with sufficient quantities of Trehalose IV, or fail to do so at acceptable quality levels.

We did not have in the past, nor do we plan to acquire, the infrastructure or internal capability to manufacture our nonclinical and clinical drug supplies for use in the conduct of our nonclinical and clinical trials, and we lack the resources and the capability to manufacture Trehalose IV on a clinical or, if approved, commercial scale. In specific instances we may rely on a single provider or manufacturer for a product candidate. For example, the raw materials used to manufacture our Trehalose IV solution product candidate are acquired from a single third party drug products supplier. Additionally, our Trehalose IV solution is manufactured by a single third party manufacturer. There are a limited number of suppliers for raw materials that are used to manufacture trehalose, and there may be a need to identify alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce any product candidate we are developing for our clinical trials, and, if approved, ultimately for commercial sale. Any significant delay or discontinuity in the supply of a product candidate, or the raw material components thereof, for an ongoing clinical trial due to the need to replace a third-party manufacturer could considerably delay completion of our clinical trials.

In the event that the FDA believes that Trehalose IV and/or any future therapeutic candidate that we may develop in the future, is approvable, our contract manufacturers would be audited by the FDA before approving our NDA. We will rely on our contract manufacturing partners for compliance with cGMPs for manufacture of both API and finished drug products. These cGMP regulations and other relevant standards cover all aspects of the manufacturing, testing, quality control and record keeping relating to Trehalose IV. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, we will not be able to secure and/or maintain regulatory approval of our product candidate being manufactured at their manufacturing facilities or have sufficient quantities to meet market demands. If the FDA or a comparable foreign regulatory authority finds deficiencies at these facilities, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval of or market Trehalose IV, if approved.

If, for any reason, these third parties are unable or unwilling to perform, we may not be able to terminate our agreements with them, and we may not be able to locate alternative manufacturers or formulators or enter into favorable agreements with them and we cannot be certain that any such third parties will have the manufacturing capacity to meet future requirements. If these manufacturers or any alternate manufacturer of finished drug product experiences any significant difficulties in its respective manufacturing processes for our API or finished Trehalose IV product or should cease doing business with us, we could experience significant interruptions in the supply of Trehalose IV or may not be able to create a supply of Trehalose IV at all. Our inability to coordinate the efforts of our third-party manufacturing partners, or the lack of capacity available at our third-party manufacturing partners, could impair our ability to supply Trehalose IV at required levels. Due to the significant regulatory requirements that we would need to satisfy in order to qualify a new bulk or finished product manufacturer, if we face these or other difficulties with our current manufacturing partners, we could experience significant interruptions in the supply of Trehalose IV if we decided to transfer the manufacture of Trehalose IV to one or more alternative manufacturers in an effort to deal with the difficulties.

In the event that Trehalose IV and/or any future product candidates that we may pursue is approved or cleared for marketing, manufacturers may not have the experience or ability manufacture those products at commercial levels. We may run into technical or scientific issues related to manufacturing or development that we may be unable to resolve in a timely manner or with available funds.

If the manufacturing costs of Trehalose IV remain at current levels, these costs may significantly impact our operating results. In order to reduce costs, we may need to develop and implement process improvements. However, in order to do so, we will need, from time to time, to notify or make submissions with regulatory authorities, and the improvements may be subject to approval by such regulatory authorities. We cannot be sure that we will receive these necessary approvals or that these approvals will be granted in a timely fashion. We also cannot guarantee that we will be able to enhance and optimize output in our commercial manufacturing process, as any deviations from normal manufacturing processes, for Trehalose IV and any other product candidate we may develop, could result in reduced production yields, product defects, and other supply disruptions. If we cannot enhance and optimize output, we may not be able to reduce our costs over time.

Risks Related to Our Intellectual Property

If we are unable to obtain and maintain effective patent and other intellectual property rights for our product candidates or any future product candidates, we may not be able to compete effectively in our markets.

We rely upon a combination of patents, trade secret protection, and confidentiality agreements to protect the intellectual property related to our technologies and product candidates. Our success depends in large part on our and our licensors’ ability to obtain and maintain patent and other intellectual property protection in the United States and in other countries around the world with respect to our proprietary technology and products.

We have sought to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies, methods of treatments, formulations and products that are important to our business. This process is expensive, time consuming and inherently uncertain. We may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. It is also possible that some of our filed applications may not result in issued patents.

There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or are published in a foreign language or in some cases not at all. We therefore cannot be certain that we or our licensors were the first to make the invention claimed in our owned and licensed patents or pending applications, or that we or any of our licensors were the first to file for patent protection of such inventions before any prior publication. Even if patents do successfully issue, and even if such patents cover our product candidates, third parties may challenge their validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for our product candidates, or prevent others from designing around our claims.

If we cannot obtain and maintain effective patent rights for our product candidates, we may not be able to compete effectively and our business and results of operations could be harmed.

Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the value, enforcement or defense of our issued patents.

Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. The United States has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on future actions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. The laws and courts of foreign countries also may not protect our rights to the same extent as the laws and courts of the United States.

If we are unable to maintain effective proprietary rights for our product candidate or any future product candidates, we may not be able to compete effectively in our markets.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to obtain or to enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. Trade secrets, however, can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. There are different laws of varying scope and strength that protect trade secrets in every state of the U.S., as well as foreign countries, and depending on what acts occur where, or what law applies to a given situation, the trade secret may not be recognized as a trade secret, many not fall under a confidentiality agreement, or may be found insufficient by a court ruling on such a dispute over trade secrets or other proprietary information.

Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors, and any third parties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, we cannot provide any assurances that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret.

We may not be successful in obtaining or maintaining necessary rights to our product candidate through acquisitions and in-licenses.

While we currently have three issued patents and other pending patent applications, our programs may require the use of intellectual proprietary rights held by third parties. Accordingly, the growth of our business may depend in part on our ability to acquire, in-license, maintain or use these proprietary rights. In addition, our current and/or future product candidates may require specific formulations to work effectively and efficiently and the rights to these formulations may be held by others. We may be unable to acquire or in-license any compositions, methods of use, processes, or other third-party intellectual property rights from third parties that we identify as necessary for our current and/or future product candidates. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources, and greater clinical development and commercialization capabilities.

If we are unable to successfully obtain rights to required third-party intellectual property rights, we may have to abandon development of that program and our business and financial condition could suffer.

We may be involved in lawsuits to protect or enforce our patents or confidential information, which could be expensive, time consuming, and unsuccessful.

Competitors may infringe our patents or the patents of our licensors, or misappropriate our confidential information. If we or one of our licensing partners were to initiate legal proceedings against a third party to enforce a patent or confidential information covering or related to a product candidate we develop, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable or that the confidential information is not confidential or otherwise not protectable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability is unpredictable.

Interference or other post-grant proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority or patentability of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party, or might eliminate the key claim coverage of a product, process, or proposed technology. Depending on the proceeding, our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation, or interference or other post-grant proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation and post-grant proceedings at the PTO or equivalent patent office in any other jurisdiction could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring our current and/or future product candidates to market.

Furthermore, because of the substantial amount of discovery required in connection with any type of intellectual property litigation or even the more limited discovery in a post-grant proceeding, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation or proceeding. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our Ordinary Shares.

We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

In the past we employed, and we plan to employ in the future individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages or be subjected to a court order, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor, or that such third party owns the patent or intellectual property rights. For example, we may have inventorship or ownership disputes arise from conflicting obligations of consultants or others who are involved in developing our current or any future product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation or patent office proceedings could result in substantial costs and be a distraction to management and other employees. Therefore, we may receive less revenue from future products if such claims are successful which in turn could impact our future profitability.

We may not be able to protect our intellectual property rights throughout the world.

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting, enforcing, and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits or post-grant proceedings that we initiate and the damages or other remedies awarded to us if we prevail, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

Because we will rely on third parties to develop and manufacture our current product candidate, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements, or other similar agreements with our collaborators, advisors, employees, and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.

Risks Related to Our Business Operations

Our future success depends in part on our ability to retain our executive officers and management level employees and to attract, retain, and motivate other qualified personnel.

Our ability to compete in the highly competitive pharmaceuticals industry depends in large part upon our ability to attract and retain highly qualified managerial, pre-commercial, scientific and medical personnel. We are highly dependent on our management personnel. In order to induce valuable employees to remain with us, we have provided employees with stock options that vest over time. The value to employees of stock options that vest over time is significantly affected by movements in our stock price that we cannot control and, together with our other compensation programs and benefits, may at any time be insufficient to counteract more lucrative offers from other companies.

We are highly dependent on Fredric Price, our Executive Chairman of the Board and Chief Executive Officer and Dr. Warren Wasiewski, our Chief Medical Officer and Vice President of Research and Development. These executives have significant management and research and development, regulatory industry and/or corporate finance experience. The loss of either of these executive would impair our ability to identify, develop and market new products and conduct successful operations.

Our business and operations would suffer in the event of computer system failures, cyber-attacks on our systems or deficiency in our cyber security measures.

Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, malware, natural disasters, fire, terrorism, war and telecommunication, electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability due to lost revenues resulting from the unauthorized use or theft of sensitive business information, remediation costs, and litigation risks including potential regulatory action by governmental authorities. In addition, any such disruption, security breach or other incident could delay the further development of our future product candidates due to theft or corruption of our proprietary data or other loss of information. Our business and operations could also be harmed by any reputational damage with customers, investors or third parties with whom we work, and our competitive position could be adversely impacted.

If our development and commercialization plans and strategies develop, we expect to need additional managerial, operational, sales, marketing, financial, legal, research, and other resources. Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. Our growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates.

In addition, failure to succeed in nonclinical or clinical trials may make it more challenging to recruit and retain qualified personnel. The inability to recruit and retain qualified personnel, or the loss of the services of these executives without proper replacement, may impede the progress of our overall growth.   If this were to occur, our expenses could increase more than expected, our ability to generate and/or grow revenue could be reduced and we could face challenges in implementing our business strategy. No recruitment is anticipated while the Company is engaged with JSB-Partners to affect a business transaction.

Our employees, independent contractors, consultants, commercial partners, principal investigators, CROs and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation.

We are exposed to the risk that our employees, independent contractors, consultants, commercial partners, principal investigators, CROs and vendors may engage in fraudulent conduct or other misconduct, including intentional failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, to provide accurate information to the FDA or comparable foreign regulatory authorities, to comply with regulations pertaining to clinical trials, to comply with manufacturing standards we have established, to comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, and to report financial information or data accurately or disclose unauthorized activities to us. The misconduct of our employees and contractors could also involve the improper use of information obtained in the course of clinical trials and other research and development activities, which could result in regulatory sanctions and serious harm to our reputation. In connection with our initial public offering, we implemented a code of conduct and ethics for our directors, officers and employees, but it is not always possible to identify and deter such misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.

We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance initiatives.

As a public company, we incur significant legal, accounting, and other expenses. In addition, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules subsequently implemented by the SEC and the Nasdaq Stock Market, or Nasdaq, have imposed various requirements on public companies. New laws and regulations as well as changes to existing laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act, and changes in required accounting practices and rules adopted by the SEC and by Nasdaq, would likely result in increased costs to us as we respond to their requirements.

Emerging growth companies may implement some of these requirements over a longer period and up to five years from the date of their initial public offering. We are taking advantage of this legislation but cannot guarantee that we will not be required to implement these requirements sooner than budgeted or planned and thereby incur unexpected expenses. Shareholder activism, the current political environment, and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and will make some activities more time consuming and costly. For example, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain our current levels of such coverage.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting. Our testing may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. Our compliance with the SEC’s rules requires that we incur substantial accounting expense and expend significant management efforts. Per Section 404 of the Sarbanes-Oxley Act, we are required to disclose if we maintain effective disclosure controls and procedures and internal control over financial reporting. Nevertheless, for so long as we remain an emerging growth company, as defined in the JOBS Act, we are not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.

Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected. Moreover, if we are not able to comply with the SEC’s requirements in a timely manner or if we identify or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, we may not be able to produce timely and accurate financial statements. As a result we would be required to place additional financial and management resources on solving the issue. Moreover, if any of the aforementioned were to occur, the market price of our Ordinary Shares could decline and we could be subject to sanctions or investigations by the stock exchange on which our Ordinary Shares is listed, the SEC or other regulatory authorities.

Compliance with changing European privacy laws could require us to incur significant costs or experience significant business disruption and failure to so comply could result in an adverse impact on our business.

In Europe, Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, or the Directive, has required European Union member states to implement data protection laws to meet the strict privacy requirements of the Directive. Among other requirements, the Directive regulates transfers of personally identifiable data that is subject to the Directive, or Personal Data, to countries such as the United States, that have not been found to provide adequate protection to such Personal Data. We have not in the past and cannot in the future rely upon adherence to the U.S. Department of Commerce’s Safe Harbor Privacy Principles and compliance with the U.S.-EU and U.S.-Swiss Safe Harbor Frameworks as agreed to and set forth by the U.S. Department of Commerce, and the European Union and Switzerland, which established a means for legitimating the transfer of Personal Data by data controllers in the European Economic Area, or the EEA, to the United States. As a result of the October 6, 2015 European Union Court of Justice, or ECJ, opinion in Case C-362/14 (Schrems v. Data Protection Commissioner) regarding the adequacy of the U.S.-EU Safe Harbor Framework, the U.S. – EU Safe Harbor Framework is no longer deemed to be a valid method of compliance with requirements set forth in the Directive (and member states’ implementations thereof) regarding the transfer of Personal Data outside of the EEA. In addition, in May 2016, the European Union adopted the General Data Protection Regulation (“GDPR”) that will impose more stringent data protection requirements and will provide for greater penalties for noncompliance beginning in May 2018.

Recently, it was announced that negotiators from Europe and the United States reached political agreement on a successor to the Safe Harbor framework that will be referred to as the EU-US Privacy Shield. However, we cannot predict when all of the details regarding the Privacy Shield program will be finalized and a procedure is introduced to allow interested companies to participate in the program. While the details regarding the Privacy Shield program continue to be finalized, we will continue to face uncertainty as to whether our efforts to comply with our obligations under European privacy laws will be sufficient. If we are investigated by a European data protection authority, we may face fines and other penalties. Any such investigation or charges by European data protection authorities could have a negative effect on our existing business and on our ability to attract and retain new customers. We may be unsuccessful in establishing conforming means of transferring data from the EEA, including due to ongoing legislative activity, which may vary the current data protection landscape.

The Directive may be replaced in time with the pending European General Data Protection Regulation, which may impose additional obligations and risk upon our business and which may increase substantially the penalties to which we could be subject in the event of any non-compliance. We may incur substantial expense in complying with the new obligations to be imposed by the European General Data Protection Regulation and we may be required to make significant changes in our operations, all of which may adversely affect our business.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

Our research and development activities and our third-party manufacturers’ and suppliers’ activities will involve the controlled storage, use, and disposal of hazardous materials, including the components of our product candidate and other hazardous compounds. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling, and disposal of these hazardous materials. In some cases, these hazardous materials and various wastes resulting from their use are stored at our and our manufacturers’ facilities pending their use and disposal. We cannot eliminate the risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts and business operations, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling, and disposal of these materials and specified waste products. Although we believe that the safety procedures utilized by our third-party manufacturers for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages, such liability could exceed our resources and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently, and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. We do not currently carry biological or hazardous waste insurance coverage.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

We collect and store sensitive data, including intellectual property, our proprietary business information and that of our manufacturers, business partners, healthcare professionals and patients. This includes, where required or permitted by applicable laws, personally identifiable information. The secure maintenance of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation which could adversely affect our business.

Exchange rate fluctuations between the U.S. dollar and non-U.S. currencies may negatively affect our results of operations.

The U.S. dollar is our functional and reporting currency; however, a portion of our operations are currently conducted in Israel and a portion of the Israeli expenses are currently paid or denominated in NIS. We also contract with CROs internationally, primarily for the execution of clinical trials and manufacturing activities. A portion of these transactions are settled in Euros or Great British Pounds, or GBPs. As a result, we are exposed to the risk that the NIS, Euro or GBP may appreciate relative to the U.S. dollar, or, if the NIS, Euro or GBP instead devalue relative to the U.S. dollar, that the relative inflation rate may exceed such rate of devaluation, or that the timing of such devaluation may lag behind the relative inflation. In any such event, the U.S. dollar cost of our operations in Israel and transactions with certain CROs and other third parties would increase and our U.S. dollar-denominated results of operations would be adversely affected. To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations. If the U.S. dollar cost of our operations increases, our U.S. dollar-measured results of operations will be adversely affected. See Item 5 - “Operating and Financial Review and Prospects - Quantitative and Qualitative Disclosure about Market Risk.”

Risks Related to the Ownership of Our Ordinary Shares

Nasdaq has stock market listing standards for share prices and market capitalization, and failure to comply with the standards might result in our Ordinary Shares being de-listed from the Nasdaq Capital Market.

On March 10, 2017, we announced that the Nasdaq Listing Qualifications Department notified us that we were subject to potential delisting from the Nasdaq Global Market because our stockholders’ equity did not satisfy the Nasdaq Global Market continued listing requirements as set forth in Nasdaq Stock Market Rule 5450(b)(1)(A), which requires a minimum of $10,000,000 in stockholders’ equity. The notification provided us until April 20, 2017 to submit to Nasdaq a plan to regain compliance with the aforementioned Nasdaq rule.

On April 17, 2017, we timely notified the Nasdaq Listing Qualifications Department of our intention to transfer the listing of our Ordinary Shares to the Nasdaq Capital Market, which requires a minimum of $2,500,000 in stockholders’ equity for continued listing.

On the same date, April 17, 2017, we announced that we received an additional notice from the Nasdaq Listing Qualifications Department advising us that we were not in compliance with Nasdaq’s requirement that listed securities maintain a minimum bid price of $1.00 per share as set forth in the Nasdaq Stock Market Rule 5450(a)(1). This requirement applied irrespective of our transfer of Ordinary Shares from Nasdaq’s Global Market to Nasdaq’s Capital Market. We were afforded a 180 day period, until October 9, 2017, to regain compliance with the $1.00 minimum bid price requirement.

On September 25, 2017, we announced the effectiveness of a five to one reverse split of our share capital, as approved by our shareholders at an Extraordinary General Meeting on September 18, 2017. The reverse split was intended to increase the per-share trading price of our Ordinary Shares in order to satisfy the $1.00 minimum bid price requirement for continued listing on the Nasdaq Capital Market, and we actually regained such compliance.

While our Ordinary Shares are not subject to delisting from the Nasdaq Capital Market at the moment, there remains a constant risk of future delisting for the above and additional reasons. If this were to occur the price of our Ordinary Shares may decrease further and our ability to secure additional financing through the issuance and sale of equity could be adversely affected.  In addition, upon such delisting and if we were not able to list our Ordinary Shares on another recognized stock exchange, our Ordinary Shares would be considered a “penny stock.” Broker-dealers desiring to make transactions in penny stocks have to comply with the SEC’s penny stock rules. These requirements would also likely adversely affect the trading activity in the secondary market for our Ordinary Shares.

Our directors, executive officers and principal shareholders exercise significant control over our company, which will limit your ability to influence corporate matters.

Our executive officers, directors and principal shareholders beneficially own approximately 54.4% of our Ordinary Shares. As a result, these shareholders, if they act together, will be able to influence our management and affairs and all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions.   In addition, this concentration of ownership may delay or prevent a change in control of our company and make some future transactions more difficult or impossible without the support of these shareholders. The interests of these shareholders may not coincide with our interests or the interests of other shareholders.

We will likely be characterized as a “passive foreign investment company” for U.S. tax purposes, which could cause adverse U.S. income tax consequences to U.S. holders of our Ordinary Shares.

If we were to be characterized as a passive foreign investment company, or PFIC, under the U.S. Internal Revenue Code of 1986, as amended, or the Code, in any taxable year during which a U.S. taxpayer owns Ordinary Shares, such U.S. holder could be liable for additional taxes and interest charges upon certain distributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the Ordinary Shares, whether or not we continue to be a PFIC. Based on the nature of our business, the projected composition of our income and the projected composition and estimated fair market values of our assets, we believe that we likely will be deemed a PFIC. In addition, we may have been a PFIC in prior years and may be a PFIC in the future. Were we to be classified as a PFIC, a U.S. investor may be able to mitigate some of the adverse U.S. federal income tax consequences with respect to owning the Ordinary Shares for our taxable year ended December 31, 2016, provided that such U.S. investor is eligible to make, and successfully makes, a “mark-to-market” election. U.S. investors could also mitigate some of the adverse U.S. federal income tax consequences of us being classified as a PFIC by making a “qualified electing fund”, or QEF, election, provided that we provide the information necessary for a U.S. investor to make such an election. We intend to make available to U.S. investors upon request the information necessary for U.S. holders to make qualified electing fund elections. U.S. Holders are strongly urged to consult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or mark-to-market election with respect to our Ordinary Shares in the event we that qualify as a PFIC. For more information see Item 10.E - “Taxation - U.S. Federal Income Tax Consequences.”

We do not know whether a market for our Ordinary Shares will be sustained or what the market price of our Ordinary Shares will be and as a result it may be difficult for you to sell your shares.

On August 5, 2014, we completed an initial public offering of 3,200,000 Ordinary Shares at a price to the public of $11.00 per share. In March 2016, we completed the sale of 2,161,290 Ordinary Shares in a registered direct offering at a price of $3.10 per share, which included a private placement of warrants to purchase additional Ordinary Shares. Although our Ordinary Shares were quoted on the Nasdaq Global Market, and then on the Nasdaq Capital Market, an active trading market for our Ordinary Shares may not be sustained. It may be difficult for you to sell your Ordinary Shares at all or without depressing the market price for the Ordinary Shares. As a result of these and other factors, you may not be able to sell your Ordinary Shares at or above the price you paid for such shares or at all. In addition, the trading price of our Ordinary Shares is likely to be volatile.

We have registered for offer and sale of the Ordinary Shares that are reserved for issuance pursuant to outstanding options, and intend to similarly register addition Ordinary Shares in the future. Shares covered by such registration statements upon the exercise of stock options generally will be eligible for sale in the public market, except that affiliates continue to be subject to volume limitations and other requirements of Rule 144 under the Securities Act. The issuance or sale of such shares could depress the market price of our Ordinary Shares.

In addition, the stock market in general, and Nasdaq in particular, as well as biotechnology companies, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of small companies. Broad market and industry factors may negatively affect the market price of our Ordinary Shares, regardless of our actual operating performance. Further, a systemic decline in the financial markets and related factors beyond our control may cause our share price to decline rapidly and unexpectedly.

We may be subject to securities litigation, which is expensive and could divert management attention.

The market price of our securities may be volatile, and in the past companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant liabilities. While we currently have directors’ and officers’ insurance, there is no guarantee that the current policy will be maintained, or whether it will be sufficient to cover the costs of potential litigation.

Sales of a substantial number of our Ordinary Shares in the public market by our existing shareholders could cause our share price to fall.

Sales of substantial amounts of our Ordinary Shares in the public market, or the perception that these sales may occur, could materially and adversely affect the price of our securities and could impair our ability to raise capital through the sale of additional equity securities. Our Ordinary Shares are freely tradable, without restriction, in the public market.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations or publish negative reports regarding our business or our Ordinary Shares, our share price and trading volume could decline.

The trading market for our Ordinary Shares is and will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not have any control over these analysts and we cannot provide any assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding our Ordinary Shares, or provide more favorable relative recommendations about our competitors, our share price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

We have never paid cash dividends on our capital stock and we do not anticipate paying any dividends in the foreseeable future. Consequently, any gains from an investment in our Ordinary Shares will likely depend on whether the price of our Ordinary Shares increases, which may not occur.

We have not paid cash dividends on any of our classes of capital stock to date and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the Israeli Companies Law 5759-1999, or the Companies Law, imposes restrictions on our ability to declare and pay dividends. As a result, capital appreciation, if any, of our Ordinary Shares will be your sole source of gain for the foreseeable future. Consequently, in the foreseeable future, you will likely only experience a gain from your investment in our Ordinary Shares if the price of our Ordinary Shares increases beyond the price in which you originally acquired the Ordinary Shares.

The JOBS Act and our status as a foreign private issuer will allow us to postpone the date by which we must comply with some of the laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC, which could undermine investor confidence in our company and adversely affect the market price of our Ordinary Shares.

 For so long as we remain an “emerging growth company” as defined in the JOBS Act, we intend to take advantage of certain exemptions from various requirements that are applicable to public companies that are not emerging growth companies including:

We intend to take advantage of these exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of our initial public offering which occurred in 2014, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.

Our status as a foreign private issuer also exempts us from compliance with certain laws and SEC regulations and certain regulations of Nasdaq, including the proxy rules, the short-swing profits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Also, although the Companies Law requires us to disclose the annual compensation of our five most highly compensated senior officers and directors on an individual basis (rather than on an aggregate basis, as was formerly permitted under the Companies Law for Israeli public companies listed overseas, such as in the United States, prior to a recent amendment), this disclosure is not as extensive as that required of a U.S. domestic issuer. For example, it currently appears as if the disclosure required under Israeli law would be limited to compensation paid in the immediately preceding year without any requirement to disclose option exercises and vested stock options, pension benefits or potential payments upon termination or change of control.

We cannot predict if investors will find our Ordinary Shares less attractive because we may rely on these exemptions. If some investors find our Ordinary Shares less attractive as a result, there may be a less active trading market for our Ordinary Shares, and our share price may be more volatile and may decline.

Risks Related to Israeli Law and Our Operations in Israel

While our senior management team is in the United States, a number of our current directors and future employees may be located in Israel and, therefore, our results may be adversely affected by political, economic and military instability in Israel.

Our business headquarters and a number of our directors as well as potential future employees are or will be located in Israel. Similarly, we are incorporated under Israeli law and we may, at a future time, opt to rent office space in Israel. Accordingly, security, political and economic conditions in the Middle East in general, and in Israel in particular, may directly affect our business.

Over the past several decades, a number of armed conflicts have taken place between Israel and its Arab neighbors and a state of hostility, varying in degree and intensity, has led to security and economic problems for Israel. From time to time since late 2000, there has also been a high level of violence between Israel and the Palestinians. In addition, since 2010 political uprisings and conflicts in various countries in the Middle East, including Egypt and Syria, are affecting the political stability of those countries. Any armed conflicts or political instability in the region, including acts of terrorism or any other hostilities involving or threatening Israel, could affect business conditions and could make it more difficult for us to conduct our operations in Israel, which could increase our costs and adversely affect our financial results.

Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial conditions or the expansion of our business.

We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and harm our business.

A significant portion of our intellectual property has been developed by our employees in the course of their employment for us. Under the Israeli Patent Law, 5727-1967, or the Patent Law, and recent decisions by the Israeli Supreme Court and the Israeli Compensation and Royalties Committee, a body constituted under the Patent Law, Israeli employees may be entitled to remuneration for intellectual property that they develop for us unless they explicitly waive any such rights. Although we do not currently have any Israeli employees, to the extent we enter into agreements with our future employees pursuant to which they agree that any inventions created in the scope of their employment or engagement are owned exclusively by us (as we did in the past), we may face claims demanding remuneration. As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current and former employees, or be forced to litigate such claims, which could negatively affect our business.

Under current Israeli law, we may not be able to enforce our Israeli employees’ covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.

In the past we entered, and we plan in the future to enter into non-competition agreements with our key employees, in most cases within the framework of their employment agreements. These agreements prohibit our key employees, if they cease working for us, from competing directly with us or working for our competitors for a limited period. Under applicable Israeli law, we may be unable to enforce these agreements or any part thereof against our Israeli employees. If we cannot enforce our non- competition agreements against our Israeli employees, then we may be unable to prevent our competitors from benefiting from the expertise of these former employees, which could impair our business, results of operations and ability to capitalize on our proprietary information.

Provisions of Israeli law and our amended and restated articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.

As a company incorporated under the law of the State of Israel, we are subject to Israeli corporate law. Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date on which a merger proposal is filed by each merging company with the Israel Registrar of Companies and at least 30 days have passed from the date on which the shareholders of both merging companies have approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, a tender offer for all of a company’s issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital. Completion of the tender offer also requires approval of and a majority of the offerees that do not have a personal interest in the tender offer approves the tender offer, unless, following consummation of the tender offer, the acquirer would hold at least 98% of the company’s outstanding shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, claim that the consideration for the acquisition of the shares does not reflect their fair market value, and petition an Israeli court to alter the consideration for the acquisition, unless accordingly, other than those who indicated their acceptance of the tender offer in case the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek such appraisal rights., and the acquirer or the company published all required information with respect to the tender offer prior to the tender offer’s response date. See Item 10.B - “Articles of Associations - Acquisitions under Israeli Law” for additional information.

Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. See Item 10.E - “Taxation - Israeli Tax Considerations” for additional information.

Our amended and restated articles of association also contain provisions that could delay or prevent changes in control or changes in our management without the consent of our Board of Directors. These provisions include the following:

It may be difficult to enforce a judgment of a United States court against us, to assert United States securities laws claims in Israel or to serve process on our officers and directors that reside outside of the United States.

We were incorporated in Israel. Several of our directors reside outside of the United States, and most of our assets and the assets of these persons are located outside of the United States. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not necessarily be enforced by an Israeli court. It also may be difficult for you to affect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to United States securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of United States securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not United States law is applicable to the claim. If United States law is found to be applicable, the content of applicable United States law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a United States or foreign court.

Your rights and responsibilities as a shareholder will be governed by Israeli law which differs in some material respects from the rights and responsibilities of shareholders of U.S. companies.

The rights and responsibilities of the holders of our Ordinary Shares are governed by our amended and restated articles of association and by Israeli law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in typical U.S.-based corporations. In particular, a shareholder of an Israeli company has certain duties to act in good faith and fairness toward the Company and other shareholders, and to refrain from abusing its power in us. See Item 16G. - “Corporate Governance - Approval of Related Party Transactions under Israeli Law” for additional information. There is limited case law available to assist us in understanding the nature of this duty or the implications of these provisions. These provisions may be interpreted to impose additional obligations on holders of our Ordinary Shares that are not typically imposed on shareholders of U.S. corporations.

Our operations may be disrupted as a result of the obligation of management or key personnel to perform military service.

While we do not currently have employees in Israel, any future employees and consultants in Israel, that may include members of our senior management, may be obligated to perform one month, and in some cases longer periods, of military reserve duty until they reach the age of 40 (or older, for citizens who hold certain positions in the Israeli armed forces reserves) and, in the event of a military conflict or emergency circumstances, may be called to immediate and unlimited active duty. In the event of severe unrest or other conflict, individuals could be required to serve in the military for extended periods of time. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be similar large-scale military reserve duty call-ups in the future. Our operations could be disrupted by the absence of a significant number of our officers, directors, employees and consultants related to military service. Such disruption could materially adversely affect our business and operations.