ITEM 1A. RISK FACTORS
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.
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 balances at March 31, 2021 were approximately $758,000. Despite raising $500,000 in gross
proceeds through the sale of convertible debentures in January 2021, 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,
2020 consolidated 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 second quarter of 2022. 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 engage 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, 2021, we have
raised approximately $38.6 million through the sale of our securities and exercise of outstanding warrants. During this same period, we
have recorded an accumulated deficit of approximately $87.6 million. Our net losses for the two most recent fiscal years ended December
31, 2020 and 2019 were $6,295,000 and $934,000, respectively. Our increase in net losses is primarily the result of a loss from the change
in fair value of our derivative instruments and an increase in interest expense, partially offset by an increase in gains from conversion
of debt. 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 mean 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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manage growth;
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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.
We rely on technologies that we may not
be able to commercially develop, which will prevent us from generating revenues, operating profitably or providing investors any return
on their investment.
We have refocused our development on our adenosine
receptor modulator technologies and our ability to generate revenue and operate profitably will depend on us being able to develop these
technologies for human applications. We cannot guarantee that the results obtained in clinical evaluation of our therapies will be sufficient
to warrant approval by the FDA for clinical use. Even if our therapies are approved for use by the FDA, there is no guarantee that they
will exhibit an enhanced efficacy relative to competing products such that they will be adopted by the medical community. Without significant
adoption by the medical community our product candidates will have limited commercial potential which will likely result in the loss of
your entire investment.
Inability to complete pre-clinical and clinical testing and trials
will impair the viability of the Company.
We are in the development stage and have not yet
applied for approval by the FDA to conduct clinical trials. Even if we successfully file an IND application and receive clearance from
the FDA to commence trials, the outcome of pre-clinical, clinical and product testing of our product candidates is uncertain, and if we
are unable to satisfactorily complete such testing, or if such testing yields unsatisfactory results, we will be unable to commercially
produce our proposed products. Before obtaining regulatory approvals for the commercial sale of any potential human products, our product
candidates will be subjected to extensive pre-clinical and clinical testing to demonstrate their safety and efficacy in humans. No assurances
can be given that the clinical trials of our product candidates, or those of licensees or collaborators, will demonstrate the safety and
efficacy of such product candidates at all, or to the extent necessary to obtain appropriate regulatory approvals, or that the testing
of such product candidates will be completed in a timely manner, if at all, or without significant increases in costs, program delays
or both, all of which could harm our ability to generate revenues. In addition, our product candidates may not prove to be more effective
for treating disease than current therapies. Accordingly, we may have to delay or abandon efforts to research, develop or obtain regulatory
approval to market our product candidates. Many companies involved in biotechnology research and development have suffered significant
setbacks in advanced clinical trials, even after promising results in earlier trials. The failure to adequately demonstrate the safety
and efficacy of a therapeutic product under development could delay or prevent regulatory approval of the product and could harm our ability
to generate revenues, operate profitably or produce any return on an investment in our company.
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.
A pandemic, epidemic or outbreak of an infectious
disease in the markets in which we operate or that otherwise impacts our facilities or advisors could adversely impact our business.
If a pandemic, epidemic,
or outbreak of an infectious disease including the recent outbreak of respiratory illness caused by a novel coronavirus (COVID-19) or
other public health crisis were to affect our facilities or those of our suppliers, our business could be adversely affected. A pandemic
typically results in social distancing, travel bans and quarantine, and this may limit access to our facilities, management, support staff
and professional advisors. These factors, in turn, may not only materially impact our operations and financial condition, but our overall
ability to react timely to mitigate the impact of this event. Also, it may hamper our efforts to comply with our filing obligations with
the Securities and Exchange Commission.
Business or economic
disruptions or global health concerns could seriously harm our development efforts and increase our costs and expenses.
Broad-based business
or economic disruptions could adversely affect our ongoing or planned research and development activities. For example, in November 2019
an outbreak of a novel strain of coronavirus originated in Wuhan, China, and has since spread around the world, including to the United
States. To date, this outbreak has already resulted in extended shutdowns of many businesses around the world, including in the United
States. Global health concerns, such as coronavirus, could also result in social, economic, and labor instability in the countries in
which we or the third parties with whom we engage operate. We cannot presently predict the scope, severity and longevity of any potential
business shutdowns or disruptions, but if we or any of the third parties with whom we engage or plan to engage, including the suppliers,
clinical trial sites, regulators and other third parties with whom we conduct business or plan to conduct business, were to experience
shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could
be materially and negatively impacted. It is also possible that global health concerns such as this one could disproportionately impact
the hospitals and clinical sites in which we conduct or plan to conduct any of our clinical trials, which could have a material adverse
effect on our business and our results of operation and financial condition.
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 that may compete with us 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 affected.
We are dependent upon third parties to develop
our product candidates, and such parties are, to some extent, outside of our control.
We depend and plan to 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 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, 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 may 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 may seem promising in certain respects, 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 to 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 1,000,000,000 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 May 7, 2021, we have issued and outstanding 515,211,219 shares of common stock. We have also 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, 5,000 shares of Series D 0% Convertible
Preferred Stock, all of which are outstanding, 5,000 shares of Series E 0% Convertible Preferred Stock, all of which are outstanding,
and 8,000 shares of Series F 0% Convertible Preferred Stock, all of which are outstanding. Accordingly, we are entitled to issue 484,788,781
shares of common stock, and 29,981,505 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.
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 May 7, 2021, we had 1,000,000,000 shares
of common stock authorized and 515,211,219 shares outstanding, 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, 5,000 shares
of Series D 0% Convertible Preferred Stock issued and outstanding, 5,000 shares of Series E 0% Convertible Preferred Stock issued and
outstanding, and 8,000 shares of Series F 0% Convertible Preferred Stock issued and outstanding. We additionally have issued an aggregate
of $4,991,048 of senior convertible debentures and convertible notes that are convertible into common stock at any time, of which $803,902
is outstanding. Substantially all of the common shares and common shares underlying the Series A 0% Convertible Preferred, Series B 0%
Convertible Preferred, Series C 0% Convertible Preferred, Series D 0% Convertible Preferred, Series E 0% Convertible Preferred, and Series
F 0% Convertible Preferred are available for public sale, subject in some cases to volume and other limitations or delivery of a prospectus.
As of May 7, 2021, we were obligated to reserve for issuance (i) 438 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) 50,782 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) 1,333 shares of common stock issuable upon the conversion of 5,000 shares of Series D 0% Convertible Preferred Stock, (v) 16,667
shares of common stock issuable upon the conversion of 5,000 shares of Series E 0% Convertible Preferred Stock, (vi) an indeterminate
number of shares of common stock issuable upon the conversion of 8,000 shares of Series F 0% Convertible Preferred Stock (such amount
will equal 80% of the common stock post conversion), (vii) 4,798 shares of our common stock issuable upon exercise of outstanding warrants
at a weighted average exercise price of $15.99 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, (viii) 176 shares of our common stock
issuable upon exercise of outstanding stock options under our equity compensation plans (all of such plans have been cancelled during
the first quarter of 2021) at a weighted average exercise price of $1,939.48 per share and (ix) 94,576,683 shares of our common stock
issuable upon conversion of our outstanding convertible notes/debentures. 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. 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.
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.
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.