We
have described below a number of uncertainties and risks which, in addition to uncertainties and risks presented elsewhere in
this Quarterly Report, may adversely affect our business, operating results and financial condition. The uncertainties and risks
enumerated below as well as those presented elsewhere in this Quarterly Report should be considered carefully in evaluating us,
our business and the value of our securities. The following important factors, among others, could cause our actual business,
financial condition and future results to differ materially from those contained in forward-looking statements made in this Quarterly
Report or presented elsewhere by management from time to time.
We
have described below a number of uncertainties and risks which, in addition to uncertainties and risks presented elsewhere in
this Quarterly Report, may adversely affect our business, operating results and financial condition. The uncertainties and risks
enumerated below as well as those presented elsewhere in this Annual Report should be considered carefully in evaluating us, our
business and the value of our securities. The following important factors, among others, could cause our actual business, financial
condition and future results to differ materially from those contained in forward-looking statements made in this Annual Report
or presented elsewhere by management from time to time.
Risks
Related to our Financial Position and Need to Raise Additional Capital
We
were forced to curtail our operations due to a lack of operating capital and we will not be able to continue as a going concern
if we do not obtain additional financing.
Since
our inception, we have funded our operations through the sale of our securities. Our cash and restricted cash balances at March
31, 2019 was $276,000. In February 2018 we were forced to curtail our operations. Despite raising $500,000 in gross proceeds through
the sale of convertible debentures in July 2018 and $25,000 in December 2018 through the sale of notes, our ability to continue
as a going concern is still wholly dependent upon obtaining sufficient capital to fund our operations. We have no committed sources
of additional capital and our access to capital funding is always uncertain. Accordingly, despite our ability to secure capital
in the past, we cannot assure you that we will be able to secure additional capital through financing transactions, including
issuance of debt, or through other means such as the licensing of our technology or grants. In the event that we are not able
to secure additional funding, we may be forced to curtail operations, delay or stop ongoing clinical trials, cease operations
altogether or file for bankruptcy.
Our
auditors have expressed substantial doubt about our ability to continue as a going concern.
Our
auditors’ report on our December 31, 2018 financial statements expressed an opinion that our capital resources as of the
date of their audit report were not sufficient to sustain operations or complete our planned activities for the upcoming year
unless we raised additional funds. Our current cash level raises substantial doubt about our ability to continue as a going concern
past the fourth quarter of 2019. If we do not obtain additional funds by such time, we may no longer be able to continue as a
going concern and will cease operation which means that our shareholders will lose their entire investment.
Risks
Relating to Our Stage of Development and Business
If
we are unable to successfully build a new management team and secure additional members and employees, our business could be harmed.
On
July 15, 2019, Christopher Lowe, our chief executive officer, president and principal accounting officer resigned. In February
2018, Ronald Shazer, MD, resigned as our chief medical officer. Effective July 26, 2019, we appointed Michael Cain as our interim
Chief Executive Officer and Chief Financial Officer. We will need to continue to augment senior management as well as additional
personnel to execute our business plan and grow our business. Our success depends largely on the development and execution of
our business strategy by our senior management team. The recent transitions in our executive team may be disruptive to our business,
and if we are unable to manage an orderly transition, our business may be adversely affected. Additionally, since our management
team consists of only one individual, Mr. Cain, the loss of Mr. Cain would likely harm our ability to implement our business strategy
and respond to the rapidly changing market conditions in which we operate. There may be a limited number of persons with the requisite
skills to serve in these positions, and we cannot assure you that we would be able to identify or employ such qualified personnel
on acceptable terms, if at all. Additionally, we cannot assure you that management will succeed in working together as a team.
In the event that we are unsuccessful, our business and prospects could be harmed.
We
are an early-stage company, have no product revenues, are not profitable and may never be profitable.
From
inception through March 31, 2019, we have raised approximately $36.9 million through the sale of our securities and exercise of
outstanding warrants. During this same period, we have recorded an accumulated deficit of approximately $60 million. Our net losses
for the two most recent fiscal years ended December 31, 2018 and 2017 were $12,000 and $11.1 million, respectively. Our decrease
in net losses is a result of our curtailment of operations beginning February 2018. None of our products in development have received
approval from the United States Food and Drug Administration or FDA, or other regulatory authorities; we have no sales and have
never generated revenues nor do we expect to for the foreseeable future. We have currently curtailed our pre-clinical and clinical
trials related to mipsagargin and are currently focusing our efforts on the development of our adenosine receptor modulators.
We expect to incur significant operating losses for the foreseeable future as we continue the research, pre-clinical and clinical
development of our product candidates as well as the possible in-licensing of additional clinical and pre-clinical assets. Accordingly,
we will need additional capital to fund our continuing operations and any expansion plans. Since we do not generate any revenue,
the most likely sources of such additional capital include the sale of our securities, a strategic licensing collaboration transaction
or joint venture involving the rights to one or more of our product candidates, or from grants. To the extent that we raise additional
capital by issuing equity securities, our stockholders are likely to experience dilution with regard to their percentage ownership
of the company, which may be significant. If we raise additional funds through collaborations or licensing arrangements, we may
be required to relinquish some or all the rights to our technologies, product candidates, or grant licenses on terms that are
not favorable to us. If we raise additional capital by incurring debt, we could incur significant interest expense and become
subject to covenants that could affect the manner in which we conduct our business, including securing such debt obligations with
our assets.
Our
product candidates are at various stages of early development and significant financial resources are required to develop commercially
viable products and obtain regulatory approval to market and sell such products. We will need to devote significantly more research
and development efforts, financial resources and personnel to develop commercially viable products and obtain regulatory approvals.
We may encounter hurdles and unexpected issues as we proceed in the development of our other product candidates. While initial
data from our research appear promising, the outcome of the pre-clinical and development work is uncertain and future trials may
ultimately be unsuccessful. If we fail to develop and successfully commercialize our product candidates, our business may be materially
harmed and could fail.
We
have a limited operating history as a company, and may not be able to effectively operate our business.
Our
limited staff and operating history means that there is a high degree of uncertainty regarding our ability to:
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develop
and commercialize our technologies and proposed products;
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obtain
regulatory approval to commence the marketing of our products;
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identify,
hire and retain the needed personnel to implement our business plan;
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achieve
market acceptance or insurance reimbursement for any of our proposed products, if successfully developed; or
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respond
to competition.
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No
assurances can be given as to exactly when, if at all, we will be able to fully develop, and take the necessary steps to derive
any revenues from our proposed product candidates.
Raising
capital may be difficult as a result of our history of losses and limited operating history in our current stage of development.
When
making investment decisions, investors typically look at a company’s management, earnings and historical performance in
evaluating the risks and operations of the business and the business’s future prospects. Our history of losses, new senior
management team and relatively limited operating history in our current stage of development makes such evaluation, as well as
any estimation of our future performance, substantially more difficult. As a result, investors may be unwilling to invest in us
or on terms or conditions which are acceptable. If we are unable to secure additional financing, we may need to materially scale
back our business plan and/or operations or cease operations altogether.
Risks
Related to Commercialization
The
market for our proposed products is rapidly changing and competitive.
The
pharmaceutical and biotechnology industries are subject to rapid and substantial technological change and innovation. Developments
by others may render our proposed products noncompetitive or obsolete, or we may be unable to keep pace with technological developments
and other market factors. Competition from pharmaceutical and biotechnology companies, universities, governmental entities and
others diversifying into the field is intense and is expected to increase.
As
a pre-revenue company, our resources are limited and we may experience challenges inherent in the early development of novel therapeutics.
Competitors have developed or are in the process of developing technologies that are, or in the future may be, the basis for competition.
Some of these technologies may have an entirely different approach or means of accomplishing similar therapeutic efforts compared
to our proposed products. Our competitors may develop therapies that are safer, more effective and less costly than our proposed
products and therefore, present a serious competitive threat to us.
The
acceptance of therapies that are alternatives to ours may limit market acceptance of our proposed products, even if commercialized.
Many of our targeted diseases and conditions can also be treated by other medications and treatments. These treatments may be
widely accepted in medical communities and have a longer history of use. The established use of other competing therapies may
limit the potential for our proposed products, even if commercialized.
Our
proposed products may not be accepted by the healthcare community.
Our
proposed products, if approved for marketing, may not achieve market acceptance by the healthcare community since hospitals, physicians,
patients or the medical community in general may decide not to utilize them. We are attempting to develop products that are likely
to be first approved for marketing as a treatment for late stage cancer where there is no truly effective standard of care. If
approved for use in late stage cancer, our proposed products might then be evaluated in earlier stages where they could represent
a substantial departure from established treatment methods and would most likely compete with a number of more conventional drugs
and therapies which are manufactured and marketed by major pharmaceutical companies. It is too early in the development cycle
of our proposed products for us to predict our major competitors. The degree of market acceptance of our products, if developed,
will depend on a number of factors, including but not limited to:
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our
ability to demonstrate the clinical efficacy and safety of our proposed products to the medical community;
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our
ability to create products that are superior to alternative products;
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our
ability to establish in the medical community the potential advantage of our treatments over alternative treatment methods;
and
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the
reimbursement policies of government and third-party payors.
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If
the healthcare community does not accept our products, our business could be materially harmed.
Our
potential competitors in the biotechnology and pharmaceutical industries have significantly greater resources than we have.
We
compete against numerous companies, many of which have substantially greater resources than we have. Several such competitors
have research programs and/or efforts to treat the same diseases we target. Companies such as Roche, Novartis, Celgene, Merck
& Co., Inc., Johnson & Johnson, and Sanofi S.A., as well as others, have substantially greater financial, research, manufacturing
and marketing resources than we do. As a result, such competitors may find it easier to compete in our industry and bring competing
products to market.
Risks
Related to the Development and Manufacturing of Our Product Candidates
We
intend to rely exclusively upon third-party FDA-regulated manufacturers and suppliers for our proposed products.
We
currently have no internal manufacturing capability, and intend to rely exclusively on FDA-approved licensees, strategic partners
or third party contract manufacturers or suppliers for the foreseeable future. Because manufacturing facilities are subject to
regulatory oversight and inspection, the failure of any of our third-party FDA regulated manufactures or suppliers to comply with
regulatory requirements could result in material manufacturing delays and product shortages, which could delay or otherwise negatively
impact our clinical trials and product development plans. Should we be forced to manufacture our proposed products, we cannot
give any assurance that we would be able to develop internal manufacturing capabilities or secure third party suppliers for raw
materials. In the event that we seek third party suppliers or alternative manufacturers, they may require us to purchase a minimum
amount of materials or could require other unfavorable terms. Any such event could materially impact our business prospects and
could delay the development of our proposed products. Moreover, we cannot give any assurance that the contract manufacturers or
suppliers that we select will be able to supply our products in a timely or cost effective manner or in accordance with applicable
regulatory requirements or our own specifications.
We
may not be able to establish or maintain the third-party relationships that are necessary to develop or potentially commercialize
our product candidates.
As
needed, we plan to rely heavily on third party collaborators, partners, licensees, clinical research organizations, clinical investigators,
vendors or other third parties to support our research and development efforts and to conduct clinical trials for our product
candidates. We cannot guarantee that we will be able to successfully negotiate agreements for, or maintain relationships with,
these third parties on a commercially reasonable basis, if at all. Additionally, to commercialize our proposed products, we intend
to rely on third party licensees or the outright sale of our proposed products to pharmaceutical partner(s). If we fail to establish
or maintain such third-party relationships as anticipated, our business could be adversely effected.
We
are dependent upon third parties to develop our product candidates, and such parties are, to some extent, outside of our control.
We
depend upon independent contract research organizations, investigators and collaborators, such as universities and medical institutions,
to conduct our pre-clinical and clinical studies. These individuals and/or entities are not our employees and we cannot control
the amount or timing of resources that they devote to our programs. These third parties may not assign as great a priority to
our programs or pursue them as diligently as we would if we were undertaking such programs ourselves. If these third parties fail
to devote sufficient time and resources to our programs, or if their performance is substandard, the development of our drug candidates
and corresponding FDA approval could be delayed or fail entirely.
Our
therapeutic compounds may not be able to be manufactured profitably on a large enough scale to support commercialization.
To
date, our therapeutic compounds have only been manufactured at a scale which is adequate to supply our research activities and
early-stage clinical trials. There can be no assurance that the procedures currently used to manufacture our therapeutic compounds
will work at a scale which is adequate for commercial needs. In the event our therapeutic compounds cannot be manufactured in
sufficient quantities for commercialization, our future prospects could be significantly impacted and our financial prospects
would be materially harmed.
Risks
Relating to our Intellectual Property
Our
competitive position is dependent on our intellectual property and we may not be able to withstand challenges to our intellectual
property rights.
We
rely on our intellectual property, including our issued and applied for U.S. and foreign patents as well as our licenses, as the
foundation of our business. If our intellectual property rights are challenged, no assurances can be given that our patents or
licenses would survive claims alleging invalidity or infringement on other patents and/or licenses. In addition, disputes may
arise regarding inventorship of our intellectual property. It is possible that our intellectual property may be infringing upon
existing patents that we are not currently unaware of. As the number of participants in the marketplace grows, the possibility
of patent infringement claims against us increases. It is difficult, if not impossible, to determine how such disputes would be
resolved. Furthermore, because of the substantial amount of discovery required in connection with patent litigation, there is
a risk that some of our confidential information could be required to be publicly disclosed. Any litigation claims against us
may cause us to incur substantial costs and could place a significant strain upon our financial resources, divert the attention
of management or restrict our core business or result in the public disclosure of confidential information.
We
may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property
rights and we may be unable to protect our rights to, or use of, our technology.
Some
or all of our patent applications may not issue as patents, or the claims of any issued patents may not afford meaningful protection
for our technologies or products. In addition, patents issued to us or our licensors, if any, may be challenged and subsequently
narrowed, invalidated or circumvented. Patent litigation is widespread in the biotechnology industry and could harm our business.
Litigation might be necessary to protect our patent position or to determine the scope and validity of third-party proprietary
rights. If we choose to go to court to stop someone else from using the inventions claimed in our patents, that individual or
company would have the right to ask the court to rule that such patents are invalid and/or should not be enforced against that
third party. These lawsuits are expensive and we may not have the required resources to pursue such litigation or to protect our
patent rights. In addition, there is a risk that the court might decide that these patents are not valid and that we do not have
the right to stop the other party from using the inventions. There is also the risk that, even if the validity of these patents
is upheld, the court could refuse to stop the other party on the ground that such other party’s activities do not infringe
on our rights contained in these patents.
Furthermore,
a third party may claim that we are using inventions covered by their patent rights and may go to court to stop us from engaging
in our normal operations and activities, including making or selling our product candidates. These lawsuits are costly and could
materially increase our operating expenses and divert the attention of managerial and technical personnel. There is a risk that
a court would decide that we are infringing the third party’s patents and would order us to stop the activities covered
by the patents. In addition, there is a risk that a court would order us to pay the other party damages for having violated the
other party’s patents. The biotechnology industry has produced a proliferation of patents, and it is not always clear to
industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents
is subject to interpretation by the courts, and the interpretation is not always uniform.
Because
some patent applications in the United States may be maintained in secrecy until the patents are issued, patent applications in
the United States and many foreign jurisdictions are typically not published until eighteen months after filing, and publications
in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications
for technology covered by our issued patents or our pending applications or that we were the first to invent the technology. Our
competitors may have filed, and may in the future file, patent applications covering technology similar to ours. Any such patent
application may have priority over our patent applications and could further require us to obtain rights to issued patents covering
such technologies.
If
another party has filed a United States patent application on inventions similar to ours, we may have to participate in an interference
or other proceeding in the U.S. Patent and Trademark Office, or the PTO, or a court to determine priority of invention in the
United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful,
resulting in a loss of our United States patent position with respect to such inventions.
Some
of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have
substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation
could have a material adverse effect on our ability to raise the capital necessary to continue our operations.
Obtaining
and maintaining our patent protection depends upon compliance with various procedural, documentary, fee payment and other requirements
imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these
requirements.
The
PTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment
and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse
of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such
an event, competitors might be able to enter the market earlier than would otherwise have been the case.
We
may not be able to adequately protect our intellectual property.
We
rely in part on trade secret protection in order to protect our proprietary trade secrets and unpatented know-how. However, trade
secrets are difficult to protect, and we cannot be certain that others do not develop the same or similar technologies on their
own. Additionally, research with regard to our technologies has been performed in countries outside of the United States, and
we also anticipate conducting joint ventures, collaborations and future clinical trials outside the US. The laws in some of these
countries may not provide protection for our trade secrets and intellectual property. We have taken steps, including entering
into confidentiality agreements with our employees, consultants, service providers, and potential strategic partners to protect
our trade secrets and unpatented know-how. These agreements generally require that the other party keep confidential and not disclose
to third parties all confidential information developed by the party or made known to the party by us during the course of the
party’s relationship with us. We also typically obtain agreements from these parties which provide that inventions conceived
by the party in the course of rendering services to us are our property. However, these agreements may not be honored, including
in foreign countries in which we conduct research, and may not effectively assign intellectual property rights to us. Enforcing
a claim that a party illegally obtained and is using our trade secrets or know-how is difficult, expensive and time consuming,
and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets or
know-how. The failure to obtain or maintain trade secret protection could adversely affect our competitive position.
We
may be subject to claims that our employees or consultants have wrongfully used or disclosed alleged trade secrets of their former
employers.
As
is common in the biotechnology and pharmaceutical industries, we employ and hire individuals and/or entities who were previously
employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims
against us are currently pending, we may be subject to claims that these individuals, entities or that we have inadvertently or
otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary
to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial
costs and be a distraction to management.
Risks
Relating to Marketing Approval and Government Regulations
Data
obtained from clinical trials are susceptible to varying interpretations and may not be sufficient to support approval of our
proposed products by the FDA.
The
design of our potential clinical trials will be based on many assumptions about the expected effect of our product candidates
and if those assumptions are incorrect, our potential clinical trials may not produce statistically significant results. Preliminary
results may not be confirmed on full analysis of the detailed results of early clinical trials. Data already obtained, or in the
future obtained, from pre-clinical studies and clinical trials do not necessarily predict the results that may be obtained from
later trials. Moreover, pre-clinical and clinical data are susceptible to varying interpretations, which could delay, limit or
prevent regulatory approval. A number of companies in the pharmaceutical and biotechnology industries have suffered significant
setbacks in advanced clinical trials, even after promising results in earlier trials. The failure to adequately demonstrate the
safety and effectiveness of a proposed formulation or product under development could delay or prevent regulatory clearance of
the potential drug. Our products may not prove to be safe and effective in clinical trials and may not meet all regulatory requirements
needed to receive regulatory approval. While data from our completed trials appear promising, the outcome of the current trials
is uncertain and these trials or future trials may ultimately be unsuccessful. Our clinical trials may among other things, not
demonstrate sufficient levels of safety and efficacy necessary to obtain the requisite regulatory approvals for our drugs, and
thus our proposed drugs may not be approved for marketing.
Our
proposed products may not receive FDA or other regulatory approvals.
The
FDA and comparable government agencies in foreign countries impose substantial regulations on the manufacture and marketing of
pharmaceutical products through expensive, lengthy and detailed laboratory, pre-clinical and clinical testing procedures, sampling
activities and other costly and time-consuming procedures. Satisfaction of these regulations typically takes several years or
more and varies substantially based upon the type, complexity and novelty of the proposed product. Our proposed products are subject
to extensive regulation and/or acceptance by numerous governmental authorities in the United States, including the FDA, and authorities
in other countries. Most of our proposed products will require governmental approval before they can be commercialized. Our failure
to receive the regulatory approvals in the United States or foreign countries will materially impact our business.
Our
proposed products may not have favorable results in clinical trials or receive regulatory approval.
Encouraging
results from our studies to date should not be relied upon as evidence that our planned pre-clinical and clinical trials will
ultimately be successful or our products approved for marketing. Even though the results of our studies to date seem promising,
we will be required to demonstrate through further pre-clinical and clinical trials that our product candidates are safe and effective
for use in a diverse population before we can seek regulatory approvals for their commercial sale. There is typically an extremely
high rate of attrition from the failure of product candidates as they proceed through clinical trials. If any product candidate
fails to demonstrate sufficient safety and efficacy in any clinical trial, then we could experience potentially significant delays
in, or be required to abandon, development of that product candidate. While initial data from our preliminary studies appear promising,
the outcome of any clinical trials is uncertain and such trials or future trials may ultimately be unsuccessful.
If
users of our proposed products are unable to obtain adequate reimbursement from third-party payors, market acceptance of our proposed
products may be limited and we may not achieve revenues or profits.
The
continuing efforts of governments, insurance companies, health maintenance organizations and other payers of healthcare costs
to contain or reduce costs of health care may affect our future revenues and profitability as well as the future revenues and
profitability of our potential customers, suppliers and collaborative partners in addition to the availability of capital. In
other words, our ability to commercialize our proposed products depends in large part on the extent to which appropriate reimbursement
levels for the cost of our proposed formulations, products and related treatments are obtained by the health care providers of
these products and treatments. At this time, we cannot predict the precise impact that recently adopted or future laws will have
on these reimbursement levels.
We
may be unable to comply with our reporting and other requirements under federal securities laws.
The
Sarbanes-Oxley Act of 2002, as well as related new rules and regulations implemented by the United States Securities and Exchange
Commission, or SEC, and the Public Company Accounting Oversight Board, require changes in the corporate governance practices and
financial reporting standards for public companies. These laws, rules and regulations, including compliance with Section 404 of
the Sarbanes-Oxley Act of 2002 relating to internal control over financial reporting, would be expected to materially increase
the Company’s legal and financial compliance costs and make some activities more time-consuming and more burdensome. Presently
we qualify as a non-accelerated filer. Accordingly, we are exempt from the requirements of Section 404(b) and our independent
registered public accounting firm is not required to audit the design and operating effectiveness of our internal controls and
management’s assessment of the design and the operating effectiveness of such internal controls. In the event that we become
an accelerated filer, we will be required to expend substantial capital in connection with compliance.
We
do not have effective internal controls over our financial reporting.
Because
of our limited resources, management has concluded that our internal control over financial reporting may not be effective in
providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with U.S. generally accepted accounting principles. Effective internal controls over financial
reporting and disclosure controls and procedures are necessary for us to provide reliable financial and other reports and effectively
prevent fraud. If we cannot provide reliable financial or SEC reports or prevent fraud, investors may lose confidence in our SEC
reports, our operating results and the trading price of our common stock could suffer materially and we may become subject to
litigation.
Compliance
with changing regulation of corporate governance and public disclosure may result in additional expenses and will divert time
and attention away from revenue generating activities.
Changing
laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002
and related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated
with accessing the public markets and public reporting. Our management team invests significant time and financial resources to
comply with both existing and evolving standards for public companies, which will lead to increased general and administrative
expenses and a diversion of management time and attention from developing our business to compliance activities which could have
an adverse effect on our business.
Risks
Relating to our Securities
Our
common stock price may be particularly volatile because of our stage of development and business.
The
market prices for the securities of biotechnology and pharmaceutical companies in general, and early-stage drug development companies
in particular, such as ours, have been highly volatile and may continue to be highly volatile in the future. The following may
have a significant impact on the market price of our common stock:
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our
ability retain and augment our current management team and workforce, which currently consists of only one employee, our chief
executive officer;
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the
development status of our drug candidates, particularly the results of our clinical trials;
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market
conditions or trends related to the biotechnology and pharmaceutical industries, or the market in general;
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announcements
of technological innovations, new commercial products, or other material events by our competitors or us;
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disputes
or other developments concerning our proprietary rights;
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changes
in, or failure to meet, securities analysts’ or investors’ expectations of our financial and developmental performance;
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additions
or departures of key personnel;
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loss
of any strategic relationship;
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discussions
of our business, products, financial performance, prospects, or stock price by the financial and scientific press and online
investor communities such as chat rooms;
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industry
developments, including, without limitation, changes in healthcare policies or practices or third-party reimbursement policies;
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public
concern as to, and legislative action with respect to, testing or other research areas of biopharmaceutical and pharmaceutical
companies, the pricing and availability of prescription drugs, or the safety of drugs;
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regulatory
developments in the United States or foreign countries; and
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economic,
political and other external factors.
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Broad
market fluctuations may cause the market price of our common stock to decline substantially. Additionally, fluctuations in the
trading price or liquidity of our common stock may materially and adversely affect, among other things, the interest of investors
to purchase our common stock on the open market and, generally, our ability to raise capital.
Our
board of directors has broad discretion to issue additional securities, in the event that we have adequate authorized capital
to issue such securities.
We are authorized under our certificate of
incorporation to issue up to 150,000,000 shares of common stock and 30,000,000 “blank check” shares of preferred stock.
Shares of our blank check preferred stock provide the board of directors with broad authority to determine voting, dividend, conversion,
and other rights. As of August 1, 2019, we have issued and outstanding 150,000,000 shares of common stock and, accordingly, no
additional shares of common stock reserved for future grants under our equity compensation plans and for issuances upon the exercise
or conversion of currently outstanding shares of preferred stock, options, warrants and other convertible securities will be available
until such time as we complete a reverse stock split or authorize additional shares. As of August 1, 2019, we have issued 1,853
shares of Series A 0% Convertible Preferred Stock, of which 133.8125 are outstanding, 1,000 shares of Series B 0% Convertible Preferred
Stock, of which 71 are outstanding, 290.43148 shares of Series C 0% Convertible Preferred Stock, that are all outstanding, and
5,000 shares of Series D 0% Convertible Preferred Stock, all of which are outstanding. Accordingly, we are entitled to issue no
additional shares of common stock, and 29,994,505 additional shares of “blank check” preferred stock. Our board may
generally issue those common and preferred shares, or convertible securities to purchase those shares, without further approval
by our shareholders. Any additional preferred shares we may issue could have such rights, preferences, privileges, and restrictions
as may be designated from time-to-time by our board, including preferential dividend rights, voting rights, conversion rights,
redemption rights and liquidation provisions.
It
is likely that we will issue a large amount of additional securities to raise capital in order to further our business plans.
It is also likely that we will issue a large amount of additional securities to directors, officers, employees and consultants
as compensatory grants in connection with their services, both in the form of stand-alone grants or under our various stock plans.
Any issuances could be made at a price that reflects a discount to, or a premium from, the then-current market price of our common
stock. These issuances would dilute the percentage ownership interest of our current shareholders, which would have the effect
of reducing your influence on matters on which our stockholders vote, and might dilute the net tangible book value per share of
our common stock.
We
currently do not have enough authorized shares of common stock for additional issuances. The shareholders have approved a reverse
stock split in amount not less than 1-for-2 and not more than 1-for-500 at the discretion of the Board until December 31, 2019.
The Board currently plans to effect a reverse stock split in order to authorize additional capital for its future sale of securities
stock issuances to service providers, warrant exercises, and conversions of outstanding preferred stock and convertible debentures.
Future
sales of our common stock could cause our stock price to fall.
Transactions
that result in a large amount of newly issued shares become readily tradable, or other events that cause current stockholders
to sell shares, could place downward pressure on the trading price of our common stock. In addition, the lack of a robust trading
market may require a stockholder who desires to sell a large number of shares of common stock to sell the shares in increments
over time to mitigate any adverse impact of the sales on the market price of our stock. If our stockholders sell, or the market
perceives that our stockholders intend to sell for various reasons, substantial amounts of our common stock in the public market,
including shares issued upon the exercise of outstanding options or warrants, the market price of our common stock could fall.
Sales of a substantial number of shares of our common stock may make it more difficult for us to sell equity or equity-related
securities in the future at a time and price that we deem reasonable or appropriate. We may become involved in securities class
action litigation that could divert management’s attention and harm our business.
As
of August 1, 2019, we had 150,000,000 shares of common stock, 1,853 shares of Series A 0% Convertible Preferred Stock issued and
133.8125 Series A 0% Convertible Preferred Stock outstanding, 1,000 shares of Series B 0% Convertible Preferred Stock issued and
71 Series B 0% Convertible Preferred Stock outstanding, 290.43148 shares of Series C 0% Convertible Preferred Stock issued and
outstanding, and 5,000 shares of Series D 0% Convertible Preferred Stock issued and outstanding. We additionally have issued an
aggregate of $3,518,813 of senior convertible debentures and convertible notes that are convertible into common stock at any time,
of which $2,830,967 is outstanding. Substantially all of the common shares and common shares underlying the Series A 0% Convertible
Preferred, Series B 0% Convertible Preferred, and Series C 0% Convertible shares are available for public sale, subject in some
cases to volume and other limitations or delivery of a prospectus. As of August 1, 2019, we were obligated to reserve for issuance
(i) 328,221 shares of our common stock issuable upon the conversion of 133.8125 shares of Series A 0% Convertible Preferred Stock
including an additional number of common shares we are contractually obligated to reserve pursuant to our December 2015 offering;
(ii) 14,200,000 shares of our common stock issuable upon the conversion of 71 shares of Series B 0% Convertible Preferred Stock
including an additional number of common shares we are contractually obligated to reserve pursuant to our December 2016 offering;
(iii) 38,086,296 shares of our common stock issuable upon the conversion of 290.43148 shares of Series C 0% Convertible Preferred
Stock including an additional number of common shares we are contractually obligated to reserve pursuant to our March 2017 offering,
(iv) 1,000,000 shares of common stock issuable upon the conversion of 5,000 shares of Series D 0% Convertible Preferred Stock,
(v) 4,231,391 shares of our common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of
$1.79 per share, including an additional number of common shares we are contractually obligated to reserve pursuant to our December
2015 offering, December 2016 offering and March 2017 offering, (vi) 297,608 shares of our common stock issuable upon exercise
of outstanding stock options under our equity compensation plans at a weighted average exercise price of $5.00 per share and (vii)
878,244,110 shares of our common stock issuable upon conversion of our outstanding convertible notes. Subject to applicable vesting
requirements and holding periods, upon conversion or exercise of the outstanding convertible notes, warrants and options, the
underlying shares may be resold into the public market. Notwithstanding the foregoing, none of the shares of common stock underlying
these convertible securities may be converted or exercised given that we have no shares of common stock available under our certificate
of incorporation. We cannot predict if future issuances or sales of our common stock, or the availability of our common stock
for sale, would harm the market price of our common stock or our ability to raise capital. Notwithstanding the foregoing, we currently
do not have adequate authorized shares available for issuance pursuant to our convertible securities as of August 1, 2019.
The
market for our common stock has been illiquid and our investors may be unable to sell their shares.
Our
common stock trades with limited volume on the pink sheets of the OTC Markets Group Inc. Accordingly, although a limited public
market for our common stock exists, it is still relatively illiquid compared to that of a seasoned issuer. Prior to making an
investment in our securities, you should consider the limited market for our common stock. No assurances can be given that the
trading volume of our common stock will increase or that a liquid public market for our securities will ever materialize.
We
have not paid cash dividends in the past and do not expect to pay cash dividends in the foreseeable future.
We
have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable
future. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur
if the market price of our common stock appreciates.
Provisions
of Delaware law and executive employment agreements may prevent or delay a change of control, which could depress the trading
price of our common stock.
We
are subject to the Delaware anti-takeover laws regulating corporate takeovers. These anti-takeover laws prevent Delaware corporations
from engaging in a merger or sale of more than 10% of its assets with any stockholder, including all affiliates and associates
of the stockholder, who owns 15% or more of the corporation’s outstanding voting stock, for three years following the date
that the stockholder acquired 15% or more of the corporation’s assets unless:
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the
Board of Directors approved the transaction in which the stockholder acquired 15% or more of the corporation’s assets;
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after
the transaction in which the stockholder acquired 15% or more of the corporation’s assets, the stockholder owned at
least 85% of the corporation’s outstanding voting stock, excluding shares owned by directors, officers and employee
stock plans in which employee participants do not have the right to determine confidentially whether shares held under the
plan will be tendered in a tender or exchange offer; or
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on
or after this date, the merger or sale is approved by the Board of Directors and the holders of at least two-thirds of the
outstanding voting stock that is not owned by the stockholder.
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A
Delaware corporation may opt out of the Delaware anti-takeover laws if its certificate of incorporation or bylaws so provides.
We have not opted out of the provisions of the anti-takeover laws. As such, these laws could prohibit or delay mergers or other
takeover or change of control transactions and may discourage attempts by other companies to acquire us.
In
addition, employment agreements with certain executive officers provide for the payment of severance and accelerated vesting of
options and restricted stock in the event of termination following a change of control. These provisions could have the effect
of discouraging potential takeover attempts even if it would be beneficial to shareholders.
Our
certificate of incorporation and bylaws contain provisions that could discourage a third-party from acquiring us.
Our
certificate of incorporation and bylaws, as applicable, among other things (i) provide our board with the ability to alter the
bylaws without stockholder approval and (ii) provide that vacancies on our board of directors may be filled by a majority of directors
in office. These provisions, while designed to reduce vulnerability to an unsolicited acquisition proposal, and to discourage
certain tactics used in proxy fights, may negatively impact a third-party’s decision to acquire us even if it would be beneficial
to shareholders.
If
securities or industry analysts do not publish research or reports or if they publish unfavorable research or reports, an active
market for our common stock may not develop and the price of our common stock could decline.
We
are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment
community that generate or influence sales volume. Even if we come to the attention of such persons, they may be reluctant to
follow or recommend an unproven company such as ours until such time as we became more seasoned and viable. Generally, the trading
market for a company’s securities depends in part on the research and reports that securities or industry analysts publish.
We currently have limited research coverage by securities and industry analysts. As a consequence, there may be periods of time
when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer with significant research coverage.
We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or if developed,
will be sustained, or that current trading levels could be sustained or not diminish. In addition, in the event any analysts downgrades
our securities, the price of our shares would likely decline. If one or more of these analysts ceases to cover us or fails to
publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the price of our common
stock and its trading volume, if any, to decline.
Our
common stock may be considered a “penny stock,” and may be subject to additional sale and trading regulations that
may make it more difficult to sell.
Our
common stock may be considered a “penny stock.” The principal result or effect of being designated a penny stock is
that securities broker-dealers participating in sales of our common stock may be subject to the penny stock regulations set forth
in Rules 15g-2 through 15g-9 promulgated under the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny
stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and
dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investor’s
account. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions
in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the
investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably
determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has
sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide
the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above;
and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s
financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult
and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in
the market or otherwise.
We
currently have no available common stock available for new securities issuances, or for the conversion / exercise of outstanding
securities, which may restrict us from accessing additional capital through the sale of new securities or the exercise of outstanding
convertible securities.
Our
Certificate of Incorporation authorizes us to issue up to 150,000,000 shares of common stock, all of which are issued and outstanding
as of August 1, 2019. Accordingly, we do not have sufficient authorized shares of common stock for additional issuances. While
our shareholders have approved a reverse stock split in amount not less than 1-for-2 and not more than 1-for-500 at the discretion
of the Board until December 31, 2019, no such additional reverse stock split has taken place. Notwithstanding, the Board currently
plans to effect a reverse stock split in order to authorize additional capital for its future stock issuances, warrant exercises,
and conversions of outstanding preferred stock and convertible debentures. Our failure to complete the reverse stock split may
further subject us to penalties if we are unable to satisfy conversions of our outstanding convertible debentures, or exercises
of our outstanding warrants and options, which may harm our financial position and business prospects.
If
our management team is not effective or if we fail to attract, hire or retain qualified personnel, we may not be able to design,
develop or commercialize our products successfully or manage our business.
While
we have been able to secure a chief executive officer, our anticipated growth and expansion may require the addition of new personnel
and the development of additional expertise by existing management. There is intense competition for qualified personnel in such
areas. Accordingly, there can be no assurances that we would be able to attract and retain the qualified personnel necessary for
the successful development of our business.