Filed Pursuant to Rule 424(b)(4)
Registration No. 333-251366
PROSPECTUS
660,000
Shares
Common
Stock
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We
are offering 660,000 shares of our common stock.
Our
common stock is listed on The Nasdaq Capital Market under the symbol “GLSI.”
We
are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such,
have elected to comply with certain reduced public company reporting requirements.
Investing
in our common stock involves risks. See “Risk Factors” beginning on page 8.
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Per Share
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Total
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Price to the public
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$
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40.00
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$
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26,400,000
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Underwriting discounts and commissions
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$
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3.20
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$
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2,112,000
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Proceeds to us (before expenses)(1)
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$
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36.80
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$
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24,288,000
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(1)
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Does
not include a non-accountable expense allowance equal to 1.0% of the gross proceeds of this offering payable to the underwriters.
We refer you to “Underwriting” beginning on page 96 of this prospectus for additional information regarding underwriting
compensation.
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We
have granted the underwriters a 45-day option to purchase up to 99,000 additional shares of common stock from us at the
offering price, less the underwriting discount to cover over-allotments, if any.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The
underwriters expect to deliver the shares on or about December 22, 2020.
Prospectus
dated December 17, 2020
Aegis
Capital Corp.
TABLE
OF CONTENTS
We
have not, and the underwriters have not, authorized anyone to provide any information or to make any representations other than
those contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred
you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may
give to you.
You
should rely only on the information contained in this prospectus. No dealer, salesperson or other person is authorized to give
information that is not contained in this prospectus. This prospectus is not an offer to sell nor is it seeking an offer to buy
these securities in any jurisdiction where the offer or sale is not permitted. The selling stockholders are offering to sell and
seeking offers to buy our common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus
is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of these
securities.
All
trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners. Solely for
convenience, the trademarks and trade names in this prospectus are referred to without the ® and TM symbols, but
such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under
applicable law, their rights thereto.
PROSPECTUS
SUMMARY
The
following summary highlights selected information contained elsewhere in this prospectus and is qualified in its entirety by the
more detailed information and financial statements included elsewhere in this prospectus. It does not contain all the information
that may be important to you and your investment decision. You should carefully read this entire prospectus, including the matters
set forth under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results
of Operations,” and our financial statements and related notes included elsewhere in this prospectus. In this prospectus,
unless context requires otherwise, references to “we,” “us,” “our,” “GLSI” “Greenwich
LifeSciences,” or “the Company” refer to Greenwich LifeSciences, Inc.
Overview
We
are a biopharmaceutical company that is developing GP2, an immunotherapy designed to prevent the recurrence of breast cancer following
surgery. GP2 is a 9 amino acid transmembrane peptide of the HER2/neu (human epidermal growth factor receptor 2) protein,
a cell surface receptor protein that is expressed in a variety of common cancers, including expression in 75% of breast cancers
at low (1+), intermediate (2+), and high (3+ or over-expressor) levels. In a completed Phase IIb clinical trial led by MD Anderson
Cancer Center, no recurrences were observed in the HER2/neu 3+ adjuvant setting after median 5 years of follow-up, if the
patient received the 6 primary intradermal injections over the first 6 months. We are planning to commence a Phase III clinical
trial in 2021.
Substantial
Unmet Need
In
the adjuvant setting, a HER2/neu 3+ patient typically receives Herceptin in the first year following breast cancer surgery,
with the hope that their breast cancer will not recur, and with the odds of recurrence slowly decreasing over the first 5 years
following surgery. Herceptin has been shown to reduce recurrence rates by approximately 50%, from 25% to 12%, in the adjuvant
setting. In the neoadjuvant setting, a HER2/neu 3+ patient receives treatment before surgery and based on the results of
a biopsy at surgery, will receive Herceptin or Kadcyla, a more potent form of Herceptin, following surgery. Kadcyla has been shown
to reduce recurrence rates by 50%, from 22% to 11%, in the neoadjuvant setting. Accordingly, we believe that GP2 may be effective
in safely addressing the 50% of recurring patients who do not respond to either Herceptin or Kadcyla.
GP2
is administered in combination with the immunoadjuvant GM-CSF in years 2-4, following the first year of treatment with Herceptin,
in a series of 11 intradermal injections comprising 6 primary injections over 6 months (1 injection per month) followed by 5 booster
injections every 6 months thereafter. Furthermore, we believe that recently approved drugs such as Perjeta and Nerlynx do not
fully address this unmet need, even in their most efficacious subpopulations, and that in the initial GP2 indication, approximately
17,000 new patients may be eligible for GP2 treatment per year, which could save approximately 1,500 to 2,000 lives per year.
Statistically
Significant Phase IIb Clinical Data in HER2/neu 3+ Over-Expressors
In
a prospective, randomized, single-blinded, placebo-controlled, multi-center (16 sites led by MD Anderson Cancer Center) Phase
IIb clinical trial of HLA-A02 breast cancer patients, the combination of GP2-GMCSF-Herceptin treatment resulted in no recurrences
in 46 HER2/neu 3+ over-expressor patients who were fully treated with GP2 versus 50 placebo patients who were treated with
GMCSF-Herceptin and who recurred at a rate similar to historical recurrence rates for patients treated with Herceptin. After median
5 years of follow-up, there were 0% cancer recurrences in the HER2/neu 3+ patients treated with GP2-GMCSF-Herceptin, if
the patient received the 6 primary intradermal injections over the first 6 months, versus an 11% cancer recurrence rate in the
placebo arm treated with GMCSF-Herceptin (p = 0.0338). Thus, sequentially combining Herceptin in year 1 and GP2-GMCSF in
years 2-4 may dramatically lower breast cancer recurrences in this patient population.
Potent
Immune Response
In
the Phase IIb clinical trial, GP2 immunotherapy elicited a potent immune response in HLA-A02 patients after they received the
6 primary intradermal injections over the first 6 months. The immune response was measured by a local skin test and immunological
assays. Further, booster injections given every 6 months thereafter prolonged the immune response, thereby providing longer term
protection.
Well
Tolerated Safety Profile
In
the Phase IIb and three Phase I clinical trials where 138 patients received GP2 immunotherapy, there were no reported serious
adverse events (“SAEs”) related to GP2 treatment.
Upcoming
Phase III Clinical Trial
We
are planning to launch a Phase III clinical trial in 2021, using a similar treatment regime as the Phase IIb clinical trial. The
manufacturing plan and the Phase III trial protocol have been reviewed by the FDA and final revisions to the Phase III trial protocol
are under way, which may include an interim analysis/adaptive trial design. Furthermore, we have commenced GP2 manufacturing,
and we are currently in the process of finalizing our engagement of contract manufacturing organizations, or CMOs, and contract
research organizations, or CROs, for the Phase III clinical trial.
License
& Intellectual Property
The
Henry M. Jackson Foundation, or HJF, out-licenses technology of the United States military and it conducts research and manages
clinical trials. We entered into an exclusive license agreement with HJF pursuant to which we have been granted an exclusive worldwide
license to GP2. The GP2 issued patents provide protection ranging from 2026 through 2032 in major markets such as the U.S., Europe,
Japan, Australia, and Canada, with ongoing prosecution in other markets. We plan to register GP2 as a biologic, which may be subject
to 10-12 years market exclusivity in the U.S. upon receiving marketing approval.
Large
Initial & Expandable Breast Cancer Market
We
believe that the potential market for the proposed initial and follow-on indications is large. One in 8 U.S. women will develop
invasive breast cancer over her lifetime, with approximately 266,000 new breast cancer patients and 3.1 million breast cancer
survivors in 2018. HER2/neu 3+ breast cancer patients comprise approximately 25% of all breast cancer patients. Approximately
40% to 50% of the U.S. population contains the HLA-A02 allele, while node positive and high risk node negative patients comprise
approximately 50% of the market. Therefore, we believe that the initial market for GP2 could be the combination of the three populations
above which together comprises 6% of breast cancer patients. We believe that follow-on indications could include additional HLA
types (an additional 30% of the U.S. population) and the low to intermediate expressors of HER2/neu 1-2+ patients (an additional
50% of all breast cancer patients) which would expand the GP2 market from our estimated initial 6% to 30% of breast cancer patients
who undergo surgery. Thus the market for GP2, including follow-on indications, could be 2.4 times the current Herceptin adjuvant
setting market, which constitutes approximately 12.5% of breast cancer patients.
Our
Product Candidate
GP2
is a HER2/neu transmembrane peptide that elicits a targeted immune response against HER2/neu-expressing cancers.
Below is an image of a cell surface showing therapeutically relevant cell surface proteins in cancer. Breast cancers and other
solid tumors with elevated expression of HER2/neu protein are highly aggressive with an increased disease recurrence and
a worse prognosis.
Mechanism
of Action
As
shown below, following GP2 immunotherapy, CD8+ cytotoxic T lymphocytes (“CTLs”) recognize and destroy HER2/neu-expressing
cancer cells. GP2 is administered in combination with an FDA-approved immunoadjuvant GM-CSF, which stimulates the proliferation
of antigen presenting cells. Preclinical studies have shown that T cells sensitized against the GP2 peptide demonstrate significant
recognition of HER2/neu-expressing tumors. Both ovarian and breast cancer-specific CTLs recognize GP2, which is widely
expressed in HER2/neu-expressing tumors and is capable of inducing tumor-specific CTL populations in vitro.
Corporate
Strategy
Our
corporate strategy includes advancing GP2 into a Phase III clinical trial in the U.S. with favorable regulatory designations and
pursuing a European and global clinical trial strategy to support GP2 registration outside of the U.S. We are considering various
options to fund the Phase III clinical trial including financing and/or strategic transactions. Our strategy also includes, among
other things, building a commercialization team, pursuing additional funding after this offering, and pursuing strategic collaborations
to support the future global marketing and sales of GP2. A long term global and regional licensing process has been initiated
and will continue as the Phase III trial commences.
Pipeline
Strategy — Including GP2 In Other HER2/neu-Expressing Cancers
We
are developing follow-on indications for GP2 by designing and planning additional clinical trials to expand the breast cancer
patient population and to pursue additional HER2/neu-expressing cancers. Pending receipt of sufficient capital, the planned
Phase III clinical trial can be supplemented with the following pipeline investments:
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The
efficacy of GP2-GMCSF-Herceptin can be explored in (1) other HLA patients in the same HER2/neu 3+ breast cancer patient
population, (2) breast cancer patients who are low to intermediate expressors of HER2/neu (1-2+) and who comprise two-thirds
of the triple negative market, or (3) other HER2/neu-expressing cancers including, but not limited to, ovarian, gastrointestinal,
and colon cancers.
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We
may acquire a preclinical platform that can be quickly advanced into IND-enabling GMP manufacturing and GLP toxicology studies
followed by initial human clinical trials.
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Recent
Developments
On
December 15, 2020, we announced we had entered into an option agreement with Westport Bio to in-license a pre-clinical coronavirus
vaccine program that is currently at the stage of pre-clinical animal testing. The option is exercisable at our discretion. In
exchange for the option, we have agreed to sponsor research with Westport Bio in an aggregate amount of up to $250,000, plus additional
license and assignment fees. The founder of Westport Bio is our Chief Executive Officer and director, Snehal Patel.
Risks
Associated with Our Business
Our
business is subject to a number of risks of which you should be aware of before making an investment decision. These risks are
discussed more fully in the “Risk Factors” section of this prospectus immediately following this prospectus
summary. Some of these risks include the following:
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We
have incurred substantial losses since our inception and anticipate that we will continue to incur substantial and increasing
losses for the foreseeable future.
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We
will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed
could force us to delay, limit, reduce or terminate our product development or commercialization efforts. Such additional
financing may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our
product candidate on unfavorable terms to us.
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We
currently have no source of revenues. We may never generate revenues or achieve profitability.
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We
expect to continue to incur significant operating and non-operating expenses, which may make it difficult for us to secure
sufficient financing.
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Clinical
drug development involves a lengthy and expensive process with an uncertain outcome. The results of preclinical studies or
earlier clinical trials are not necessarily predictive of future results. Our future success is dependent on the regulatory
approval of our product candidate.
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Our
current and future product candidates, the methods used to deliver them or their dosage levels may cause undesirable side
effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an
approved label or result in significant negative consequences following any regulatory approval.
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We
may find it difficult to enroll patients in our clinical trials given the limited number of patients who have the diseases
for which our product candidate is being studied which could delay or prevent the start of clinical trials for our product
candidate.
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We
are dependent on technologies we license, and if we lose the right to license such technologies or we fail to license new
technologies in the future, our ability to develop new products would be harmed, and if we fail to meet our obligations under
our current or future license agreements, we may lose the ability to develop our product candidate.
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We
face substantial competition, which may result in others discovering, developing or commercializing products before or more
successfully than we do.
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We
are currently a clinical-stage biopharmaceutical company with a product candidate in clinical development. If we are unable
to successfully develop and commercialize our product candidate or experience significant delays in doing so, our business
may be materially harmed.
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We
rely on third-party suppliers and manufacturers as well as third parties to conduct our preclinical studies and clinical trials.
Any failure by such third parties, including, but not limited to, failure to successfully perform and comply with regulatory
requirements, could negatively impact our business and our ability to develop and market our product candidate, and our business
could be substantially harmed.
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Our
commercial success depends upon attaining significant market acceptance of our current product candidate and future product
candidates, if approved, among physicians, patients, healthcare payors and cancer treatment centers. Even if we are able to
commercialize our current product candidate or any future product candidates, the products may not receive coverage and adequate
reimbursement from third-party payors in the U.S. and in other countries in which we seek to commercialize our products, which
could harm our business.
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Our
relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other
healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational
harm and diminished profits and future earnings. If we or they are unable to comply with these provisions, we may become subject
to civil and criminal investigations and proceedings that could have a material adverse effect on our business, financial
condition and prospects.
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Our
business may be adversely affected by the ongoing coronavirus pandemic.
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Corporate
Information
We
were incorporated as a Delaware corporation on August 29, 2006 under the name Norwell, Inc. On March 2, 2018, we changed our name
to Greenwich LifeSciences, Inc. Our principal executive offices are located at 3992 Bluebonnet Dr., Building 14, Stafford, TX
77477 and our telephone number is (832) 819-3232. Our website address is www.greenwichlifesciences.com. The information
contained on our website is not incorporated by reference into this prospectus, and you should not consider any information contained
on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common shares.
Implications
of Being an Emerging Growth Company
As
a company with less than $1.07 billion in revenues during our last fiscal year, we qualify as an emerging growth company as defined
in the Jumpstart Our Business Startups Act (“JOBS Act”) enacted in 2012. As an emerging growth company, we expect
to take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include,
but are not limited to:
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being
permitted to present only two years of audited financial statements, in addition to any required unaudited interim financial
statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” disclosure in this prospectus;
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not
being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended
(“Sarbanes-Oxley Act”);
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reduced
disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements;
and
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exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden
parachute payments not previously approved.
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We
may use these provisions until the last day of our fiscal year following the fifth anniversary of the completion of our initial
public offering. However, if certain events occur prior to the end of such five-year period, including if we become a “large
accelerated filer,” our annual gross revenues exceed $1.07 billion or we issue more than $1.0 billion of non-convertible
debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
The
JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or
revised accounting standards. As an emerging growth company, we intend to take advantage of an extended transition period for
complying with new or revised accounting standards as permitted by the JOBS Act.
To
the extent that we continue to qualify as a “smaller reporting company,” as such term is defined in Rule 12b-2 under
the Securities Exchange Act of 1934, after we cease to qualify as an emerging growth company, certain of the exemptions available
to us as an emerging growth company may continue to be available to us as a smaller reporting company, including: (i) not being
required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (ii) scaled executive
compensation disclosures; and (iii) the requirement to provide only two years of audited financial statements, instead of three
years.
THE
OFFERING
Common
stock offered by us
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660,000
shares.
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Common
stock to be outstanding immediately after this offering
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12,703,541
shares (12,802,541
shares if the underwriters exercise their option in full).
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Option
to purchase additional shares
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The
underwriters have an option for a period of 45 days to purchase up to an additional 99,000 shares of our common stock
to cover over-allotments, if any.
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Use
of proceeds
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We
estimate that the net proceeds from this offering will be approximately $23.9 million or approximately $27.5
million if the underwriters exercise their over-allotment option in full, after deducting the underwriting
discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering
for clinical trials, manufacturing our product candidate, retention of contract research organizations and for working capital
and other general corporate purposes. We may also use a portion of the net proceeds to in-license, acquire or invest in complementary
businesses or products, however, we have no current commitments or obligations to do so. See “Use of Proceeds”
for a more complete description of the intended use of proceeds from this offering.
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Lock-up
agreements
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We
and our executive officers, directors and certain stockholders have agreed with the underwriters, subject to certain exceptions,
not to sell, transfer or dispose of any shares or similar securities for 180 days after the date of this prospectus. For additional
information regarding our arrangement with the underwriters, please see “Underwriting.”
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Risk
factors
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See
“Risk Factors” on page 8 and other information included in this prospectus for a discussion of factors to consider
carefully before deciding to invest in shares of our common stock.
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Nasdaq
Capital Market symbol
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“GLSI.”
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The
number of shares of our common stock to be outstanding after this offering is based on 12,043,541 shares of our common stock outstanding
as of December 1, 2020, and excludes as of that date:
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528,817
shares of common stock subject to future vesting issued to members of management and directors;
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1,498,128
shares of common stock reserved for future issuance under our 2019 Equity Incentive Plan; and
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100,869
shares of common stock issuable upon exercise of warrants at a weighted average exercise price of $7.1875.
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Unless
otherwise indicated, all information in this prospectus assumes:
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no
exercise of the warrants described above; and
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no
exercise by the underwriters of their option to purchase an additional 99,000 shares of common stock to cover over-allotments,
if any.
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Summary
Financial Data
The
following tables set forth our summary financial data as of the dates and for the periods indicated. We have derived the summary
statement of operations data for the years ended December 31, 2019 and 2018 from our audited financial statements included elsewhere
in this prospectus. The summary statements of operations data for the nine months ended September 30, 2020 and 2019 and the summary
balance sheet data as of September 30, 2020 have been derived from our unaudited financial statements included elsewhere in this
prospectus. The following summary financial data should be read with “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our financial statements and related notes and other information included elsewhere
in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future and the
results for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the
full fiscal year.
Statement
of Operations Data:
(in
thousands, except share and per share data)
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Years
Ended
December 31,
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Nine
Months Ended
September 30,
(unaudited)
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2019
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2018
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2020
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2019
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Revenues
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$
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—
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$
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—
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$
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—
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$
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—
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Operating
costs and expenses
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Research
and development
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2,606
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1,270
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459
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2,348
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General
and administrative
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819
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420
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253
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741
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Total
operating expenses
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3,425
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1,690
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712
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3,089
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Net
loss
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$
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(3,425
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)
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$
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(1,690
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$
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(712
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)
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$
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(3,089
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)
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Net
loss per common share – basic and diluted(1)
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$
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(1.52
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)
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$
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(8.32
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$
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(0.08
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$
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(13.26
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)
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Weighted
average common shares outstanding – basic and diluted(1)
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2,257,979
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202,996
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8,628,958
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232,916
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(1)
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See
Note 3 to our financial statements for an explanation of the method used to compute basic and diluted net loss per share.
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Balance
Sheet Data:
(in
thousands)
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Actual
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As Adjusted(1)
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Cash
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$
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6,214
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$
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30,104
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Working
capital
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4,641
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28,530
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Total
assets
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6,274
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30,163
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Total
liabilities
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1,616
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1,616
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Accumulated
deficit
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(27,926
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)
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(30,436
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Total
stockholders’ equity
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$
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4,658
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$
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28,548
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(1)
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On
an as adjusted basis to give further effect to our issuance and sale of 660,000 shares of common stock in this offering
at a public offering price of $40.00 per share, after deducting the estimated underwriting discounts and commissions and estimated offering expenses
payable by us.
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RISK
FACTORS
An
investment in our common stock involves a high degree of risk. Before making an investment decision, you should give careful consideration
to the following risk factors, in addition to the other information included in this prospectus, including our financial statements
and related notes, before deciding whether to invest in shares of our common stock. The occurrence of any of the adverse developments
described in the following risk factors could materially and adversely harm our business, financial condition, results of operations
or prospects. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks
Relating to Our Financial Position and Capital Needs
We
have incurred substantial losses since our inception and anticipate that we will continue to incur substantial and increasing
losses for the foreseeable future.
We
are a clinical stage biopharmaceutical company focused on the development of our novel cancer immunotherapy GP2, for breast cancer
and potentially for a broad range of other HER2/neu-expressing cancers. Investment in biopharmaceutical product development
is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate
will fail to prove effective, gain regulatory approval or become commercially viable. We do not have any products approved by
regulatory authorities and have not generated any revenues from collaboration and licensing agreements or product sales to date,
and have incurred significant research, development and other expenses related to our ongoing operations and expect to continue
to incur such expenses. As a result, we have not been profitable and have incurred significant operating losses since our inception.
For the nine months ended September 30, 2020 and the years ended December 31, 2019 and 2018, we reported a net loss of $0.7 million,
$3.4 million and $1.7 million, respectively. As of September 30, 2020 and December 31, 2019, we had an accumulated deficit of
$27.9 million and $27.2 million, respectively.
We
do not expect to generate revenues for many years, if at all. We expect to continue to incur significant expenses and operating
losses for the foreseeable future. We anticipate these losses to increase as we continue to research, develop and seek regulatory
approvals for our product candidate and any additional product candidates we may acquire, and potentially begin to commercialize
product candidates that may achieve regulatory approval. We may also encounter unforeseen expenses, difficulties, complications,
delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part,
on the rate of future growth of our expenses and our ability to generate revenues. Our expenses will further increase as we:
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conduct
clinical trials of our lead product candidate, GP2;
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in-license
or acquire the rights to, and pursue development of, other products, product candidates or technologies;
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hire
additional clinical, manufacturing, quality control, quality assurance and scientific personnel;
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seek
marketing approval for any product candidates that successfully complete clinical trials;
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develop
our outsourced manufacturing and commercial activities and establish sales, marketing and distribution capabilities, if we
receive, or expect to receive, marketing approval for any product candidates;
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maintain,
expand and protect our intellectual property portfolio; and
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add
operational, financial and management information systems and personnel.
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We
need significant additional financing to fund our operations and complete the development and, if approved, the commercialization
of our product candidate. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our
product development programs or commercialization efforts.
We
expect our existing cash as of September 30, 2020 together with proceeds from this offering will enable us to fund our operating
expenses through and capital expenditure requirements for twelve months from the date of this prospectus; however, our existing
cash will not be sufficient to complete development and obtain regulatory approval for our product candidate, and we will need
to raise significant additional capital to help us do so. In addition, our operating plan may change as a result of many factors
currently unknown to us, and we may need additional funds sooner than planned.
We
expect to expend substantial resources for the foreseeable future to continue the clinical development and manufacturing of our
product candidate and the advancement and expansion of our preclinical research pipeline. These expenditures will include costs
associated with research and development, potentially acquiring new product candidates or technologies, conducting preclinical
studies and clinical trials and potentially obtaining regulatory approvals and manufacturing products, as well as marketing and
selling products approved for sale, if any.
We
believe that it may cost approximately $12 million to $15 million to complete an interim analysis of the safety and efficacy of
our Phase III trial. Furthermore, the total cost to complete an interim analysis and file a BLA application for drug approval
in the U.S. could exceed $16 million, and the total cost to complete our Phase III trial as planned could exceed $30 million;
however, we believe that we have budget flexibility based upon the amount of proceeds we raise from financings and other sources
of capital with respect to the design of the Phase III clinical trial. We believe that we may be able to alter the cost of our
Phase III clinical trial by adjusting the enrollment rate, the number of patients, and/or the number of immunological assays.
While our budget for such Phase III trial may be flexible, our ability to reduce or modify costs may be adversely effected by,
among other things, unexpected or higher costs associated with the trial, time required to complete the trial and other factors
that may be beyond our control. Our budgets and future capital requirements depend on many factors, including:
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the
scope, progress, results and costs of our ongoing and planned development programs for our product candidate, as well as any
additional clinical trials we undertake to obtain data sufficient to seek marketing approval for our product candidate;
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the
timing of, and the costs involved in, obtaining regulatory approvals for our product candidate if our clinical trials are
successful;
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the
cost of commercialization activities for our product candidate, if our product candidate is approved for sale, including marketing,
sales and distribution costs;
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the
cost of manufacturing our product candidate for clinical trials in preparation for regulatory approval, including the cost
and timing of process development, manufacturing scale-up and validation activities;
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our
ability to establish and maintain strategic licensing or other arrangements and the financial terms of such agreements;
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the
costs to in-license future product candidates or technologies;
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the
costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including
litigation costs and the outcome of such litigation;
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the
costs in defending and resolving future derivative and securities class action litigation;
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our
operating expenses; and
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the
emergence of competing technologies or other adverse market developments.
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Additional
funds may not be available when we need them on terms that are acceptable to us, or at all. We have no committed source of additional
capital. If adequate funds are not available to us on a timely basis, we may not be able to continue as a going concern or we
may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other development activities for
our product candidate or target indications, or delay, limit, reduce or terminate our establishment of sales and marketing capabilities
or other activities that may be necessary to commercialize our product candidate.
We
may consider strategic alternatives in order to maximize stockholder value, including financings, strategic alliances, acquisitions
or the possible sale of the Company. We may not be able to identify or consummate any suitable strategic alternatives.
We
may consider all strategic alternatives that may be available to us to maximize stockholder value, including financings, strategic
alliances, acquisitions or the possible sale of the Company. We currently have no agreements or commitments to engage in any specific
strategic transactions, and our exploration of various strategic alternatives may not result in any specific action or transaction.
To the extent that this engagement results in a transaction, our business objectives may change depending upon the nature of the
transaction. There can be no assurance that we will enter into any transaction as a result of the engagement. Furthermore, if
we determine to engage in a strategic transaction, we cannot predict the impact that such strategic transaction might have on
our operations or stock price. We also cannot predict the impact on our stock price if we fail to enter into a transaction.
Raising
additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights
to our product candidate on unfavorable terms to us.
We
may seek additional capital through a variety of means, including through private and public equity offerings and debt financings,
collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional
capital through the sale of equity or convertible debt securities, or through the issuance of shares under management or other
types of contracts, or upon the exercise or conversion of outstanding derivative securities, the ownership interests of our stockholders
will be diluted, and the terms of such financings may include liquidation or other preferences, anti-dilution rights, conversion
and exercise price adjustments and other provisions that adversely affect the rights of our stockholders, including rights, preferences
and privileges that are senior to those of our holders of common stock in the event of a liquidation. In addition, debt financing,
if available, could include covenants limiting or restricting our ability to take certain actions, such as incurring additional
debt, making capital expenditures, entering into licensing arrangements, or declaring dividends and may require us to grant security
interests in our assets, including our intellectual property. If we raise additional funds through collaborations, strategic alliances,
or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies,
future revenue streams, product or product candidate or grant licenses on terms that may not be favorable to us. If we are unable
to raise additional funds through equity or debt financings when needed, we may need to curtail or cease our operations.
There
is substantial doubt about our ability to continue as a going concern.
As
of September 30, 2020 and December 31, 2019, we had cash of $6,214,337 and $6,835, respectively. In addition, we had current liabilities
of approximately $1.6 million and $1.4 million as of September 30, 2020 and December 31, 2019, respectively. We expect our existing
cash as of September 30, 2020 together with proceeds from this offering will enable us to fund our operating expenses and capital
expenditure requirements for twelve months from the date of this prospectus. In the event that we are unable to obtain additional
financing, we may be unable to continue as a going concern. There is no guarantee that we will be able to secure additional financing,
including in connection with this offering. Changes in our operating plans, our existing and anticipated working capital needs,
costs related to legal proceedings we might become subject to in the future, the acceleration or modification of our development
activities, any near-term or future expansion plans, increased expenses, potential acquisitions or other events may further affect
our ability to continue as a going concern. Although the report of our independent registered public accounting firm on our financial
statements as of and for the years ended December 31, 2019 and 2018 includes an explanatory paragraph indicating that there is
substantial doubt about our ability to continue as a going concern, following the capital raise during our third quarter of 2020,
which contributed to the improvement in our cash and working capital positions as of September 30, 2020, we believe that the substantial
doubt about our ability to continue as a going concern has been alleviated; however, we cannot guarantee that there will not be
a doubt about our ability to continue as a going concern in the future. If we cannot continue as a viable entity, our securityholders
may lose some or all of their investment in us.
We
currently have no source of revenues. We may never generate revenues or achieve profitability.
Currently,
we do not generate any revenues from product sales or otherwise. Even if we are able to successfully achieve regulatory approval
for our product candidate, we do not know when we will generate revenues or become profitable, if at all. Our ability to generate
revenues from product sales and achieve profitability will depend on our ability to successfully commercialize products, including
our current product candidate, GP2, and other product candidates that we may develop, in-license or acquire in the future. Our
ability to generate revenues and achieve profitability also depends on a number of additional factors, including our ability to:
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successfully
complete development activities, including the necessary clinical trials;
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complete
and submit either Biologics License Applications, or BLAs, or New Drug Applications, or NDAs, to the FDA and obtain U.S. regulatory
approval for indications for which there is a commercial market;
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complete
and submit applications to foreign regulatory authorities;
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obtain
regulatory approval in territories with viable market sizes;
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obtain
coverage and adequate reimbursement from third parties, including government and private payors;
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set
commercially viable prices for our product, if any;
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establish
and maintain supply and manufacturing relationships with reliable third parties and/or build our own manufacturing facility
and ensure adequate, legally globally compliant manufacturing of bulk drug substances and drug products to maintain that supply;
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develop
distribution processes for our product candidate;
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develop
commercial quantities of our product candidate, once approved, at acceptable cost levels; obtain additional funding, if required
to develop and commercialize our product candidate;
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develop
a commercial organization capable of sales, marketing and distribution for any products we intend to sell ourselves, in the
markets in which we choose to commercialize on our own;
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achieve
market acceptance of our product;
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attract,
hire and retain qualified personnel; and
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protect
our rights in our intellectual property portfolio.
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Our
revenues for any product candidate for which regulatory approval is obtained will be dependent, in part, upon the size of the
markets in the territories for which it gains regulatory approval, the accepted price for the product, the ability to get reimbursement
at any price, and whether we own the commercial rights for that territory. If the number of our addressable disease patients is
not as significant as our estimates, the indication approved by regulatory authorities is narrower than we expect, or the reasonably
accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant
revenues from sales of such products, even if approved. In addition, we anticipate incurring significant costs associated with
commercializing any approved product candidate. As a result, even if we generate revenues, we may not become profitable and may
need to obtain additional funding to continue operations. If we fail to become profitable or are unable to sustain profitability
on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to reduce our operations.
The
Tax Cuts and Jobs Act could adversely affect our business and financial condition.
H.R.
1, “An Act to provide for reconciliation pursuant to title II and V of the concurrent resolution on the budget for fiscal
year 2018,” informally entitled the Tax Cuts and Jobs Act (“Tax Act”) enacted on December 22, 2017, among other
things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal
rate of 35% to a single rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted taxable income (except
for certain small businesses), limitation of the deduction for net operating losses carried forward from taxable years beginning
after December 31, 2017 to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation
of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings
(subject to certain important exceptions), providing immediate deductions for certain new investments instead of deductions for
depreciation expense over time, and modifying or repealing many business deductions and credits (including reduction of tax credits
under the Orphan Drug Act). Notwithstanding the reduction in the corporate income tax rate, the overall impact of the Tax Act
is uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain if and to what
extent various states will conform to the Tax Act.
Our
ability to use net operating losses to offset future taxable income may be subject to limitations.
As
of December 31, 2019, we had federal net operating loss, or NOLs, carryforwards of approximately $3.8 million. Our NOLs generated
in tax years ending on or prior to December 31, 2017 are only permitted to be carried forward for 20 years under applicable U.S.
tax laws, and will begin to expire, if not utilized, beginning in 2027. These NOL carryforwards could expire unused and be unavailable
to offset future income tax liabilities. Under the Tax Act, federal NOLs incurred in tax years ending after December 31, 2017
may be carried forward indefinitely, but the deductibility of such federal NOLs is limited. It is uncertain if and to what extent
various states will conform to the Tax Act, or whether any further regulatory changes may be adopted in the future that could
minimize its applicability. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and certain corresponding
provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater
than 50% change, by value, in the ownership of its equity over a three-year period, the corporation’s ability to use its
pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited.
Risks
Related to the Development and Regulatory Approval of Our Product Candidate
Clinical-stage
biopharmaceutical companies with product candidates in clinical development face a wide range of challenging activities which
may entail substantial risk.
We
are a clinical-stage biopharmaceutical company with a product candidate in clinical development. The success of our product candidate
will depend on several factors, including the following:
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designing,
conducting and successfully completing preclinical development activities, including preclinical efficacy and IND-enabling
studies, for our product candidate or product candidates we may, in the future, in-license or acquire;
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designing,
conducting and completing clinical trials for our product candidate with positive results;
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receipt
of regulatory approvals from applicable authorities;
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obtaining
and maintaining patent and trade secret protection and regulatory exclusivity for our product candidate;
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making
arrangements with third-party manufacturers, receiving regulatory approval of our manufacturing processes and our third-party
manufacturers’ facilities from applicable regulatory authorities and ensuring adequate supply of drug product;
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manufacturing
our product candidate at an acceptable cost;
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effectively
launching commercial sales of our product candidate, if approved, whether alone or in collaboration with others;
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achieving
acceptance of our product candidate, if approved, by patients, the medical community and third-party payors;
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effectively
competing with other therapies;
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if
our product candidate is approved, obtaining and maintaining coverage and adequate reimbursement by third-party payors, including
government payors, for our product candidate;
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complying
with all applicable regulatory requirements, including FDA current Good Clinical Practices (“GCP”), current Good
Manufacturing Practices (“cGMP”), and standards, rules and regulations governing promotional and other marketing
activities;
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maintaining
a continued acceptable safety profile of the product during development and following approval; and
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maintaining
and growing an organization of scientists and business people who can develop and commercialize our product and technology.
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If
we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability
to successfully develop and commercialize our product candidate, which could materially harm our business.
We
may find it difficult to enroll patients in our clinical trials given the limited number of patients who have the diseases for
which our product candidate is being studied which could delay or prevent the start of clinical trials for our product candidate.
Identifying
and qualifying patients to participate in clinical trials of our product candidate is essential to our success. The timing of
our clinical trials depends in part on the rate at which we can recruit patients to participate in clinical trials of our product
candidate, and we may experience delays in our clinical trials if we encounter difficulties in enrollment. If we experience delays
in our clinical trials, the timeline for obtaining regulatory approval of our product candidate will most likely be delayed.
Many
factors may affect our ability to identify, enroll and maintain qualified patients, including the following:
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eligibility
criteria of our ongoing and planned clinical trials with specific characteristics appropriate for inclusion in our clinical
trials;
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design
of the clinical trial;
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size
and nature of the patient population;
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patients’
perceptions as to risks and benefits of the product candidate under study and the participation in a clinical trial generally
in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating;
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the
availability and efficacy of competing therapies and clinical trials;
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pendency
of other trials underway in the same patient population;
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willingness
of physicians to participate in our planned clinical trials;
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severity
of the disease under investigation;
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proximity
of patients to clinical sites;
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patients
who do not complete the trials for personal reasons; and
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issues
with CROs and/or with other vendors that handle our clinical trials.
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We
may not be able to initiate or continue to support clinical trials of our product candidate for one or more indications, or any
future product candidates if we are unable to locate and enroll a sufficient number of eligible participants in these trials as
required by the FDA or other regulatory authorities. Even if we are able to enroll a sufficient number of patients in our clinical
trials, if the pace of enrollment is slower than we expect, the development costs for our product candidate may increase and the
completion of our trials may be delayed or our trials could become too expensive to complete.
If
we experience delays in the completion of, or termination of, any clinical trials of our product candidate, the commercial prospects
of our product candidate could be harmed, and our ability to generate product revenue from any of our product candidate could
be delayed or prevented. In addition, any delays in completing our clinical trials would likely increase our overall costs, impair
product candidate development and jeopardize our ability to obtain regulatory approval relative to our current plans. Any of these
occurrences may harm our business, financial condition, and prospects significantly.
The
results of preclinical studies or earlier clinical trials are not necessarily predictive of future results. Our existing product
candidate in clinical trials, and any other product candidates that may advance into clinical trials, may not have favorable results
in later clinical trials or receive regulatory approval.
Success
in preclinical studies and early clinical trials does not ensure that later clinical trials will generate adequate data to demonstrate
the efficacy and safety of an investigational drug. A number of companies in the pharmaceutical and biotechnology industries,
including those with greater resources and experience than us, have suffered significant setbacks in clinical trials, even after
seeing promising results in earlier preclinical studies or clinical trials.
Despite
the results reported in earlier preclinical studies or clinical trials for our product candidate, we do not know whether the clinical
trials we may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market our product candidate
for a particular indication, in any particular jurisdiction. Efficacy data from prospectively designed trials may differ significantly
from those obtained from retrospective subgroup analyses. If later-stage clinical trials do not produce favorable results, our
ability to achieve regulatory approval for our product candidate may be adversely impacted. Even if we believe that we have adequate
data to support an application for regulatory approval to market our current product candidate or any future product candidates,
the FDA or other regulatory authorities may not agree and may require that we conduct additional clinical trials.
Clinical
drug development involves a lengthy and expensive process with an uncertain outcome.
Clinical
testing is expensive and can take many years to complete, with the outcome inherently uncertain. Failure can occur at any time
during the clinical trial process. Before obtaining approval from regulatory authorities for the sale of our product candidate,
we must conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidate in humans. Prior to
initiating clinical trials, a sponsor must complete extensive preclinical testing of a product candidate, including, in most cases,
preclinical efficacy experiments as well as IND-enabling toxicology studies. These experiments and studies may be time-consuming
and expensive to complete. The necessary preclinical testing may not be completed successfully for a preclinical product candidate
and a potentially promising product candidate may therefore never be tested in humans. Once it commences, clinical testing is
expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one
or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not
be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final
results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies
that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless
failed to obtain marketing approval of their products. We may experience numerous unforeseen events during drug development that
could delay or prevent our ability to receive marketing approval or commercialize our product candidate. In particular, clinical
trials of our product candidate may produce inconclusive or negative results. We have limited data regarding the safety, tolerability
and efficacy of GP2 administered in combination with GM-CSF. Clinical trials also require the review and oversight of an institutional
review board (“IRB”). An inability or delay in obtaining IRB approval could prevent or delay the initiation and completion
of clinical trials, and the FDA may decide not to consider any data or information derived from a clinical investigation not subject
to initial and continuing IRB review and approval.
We
may experience delays in our ongoing or future clinical trials, and we do not know whether planned clinical trials will begin
or enroll subjects on time, will need to be redesigned or will be completed on schedule, if at all. There can be no assurance
that the FDA will not put clinical trials of our product candidate on hold in the future. Clinical trials may be delayed, suspended
or prematurely terminated for a variety of reasons, such as:
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delay
or failure in reaching agreement with the FDA or a comparable foreign regulatory authority on a clinical trial design that
we are able to execute;
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delay
or failure in obtaining authorization to commence a trial or inability to comply with conditions imposed by a regulatory authority
regarding the scope or design of a trial;
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delay
or failure in reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can
be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
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delay
or failure in obtaining IRB approval or the approval of other reviewing entities, including comparable foreign regulatory
authorities, to conduct a clinical trial at each site;
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withdrawal
of clinical trial sites from our clinical trials or the ineligibility of a site to participate in our clinical trials;
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delay
or failure in recruiting and enrolling suitable subjects to participate in a trial;
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delay
or failure in subjects completing a trial or returning for post-treatment follow-up;
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clinical
sites and investigators deviating from trial protocol, failing to conduct the trial in accordance with regulatory requirements,
or dropping out of a trial;
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inability
to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial
programs, including some that may be for the same indication;
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failure
of our third-party clinical trial managers, CROs, clinical trial sites, contracted laboratories or other third-party vendors
to satisfy their contractual duties, meet expected deadlines or return trustworthy data;
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delay
or failure in adding new trial sites;
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interim
results or data that are ambiguous or negative or are inconsistent with earlier results or data;
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alteration
of trial design necessitated by re-evaluation of design assumptions based upon observed data;
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feedback
from the FDA, the IRB or a comparable foreign regulatory authority, or results from earlier stage or concurrent preclinical
studies and clinical trials, that might require modification to the protocol for a trial;
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a
decision by the FDA, the IRB, a comparable foreign regulatory authority, or us to suspend or terminate clinical trials at
any time for safety issues or for any other reason;
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unacceptable
risk-benefit profile, unforeseen safety issues or adverse side effects;
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failure
to demonstrate a benefit from using a product candidate;
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difficulties
in manufacturing or obtaining from third parties sufficient quantities of a product candidate to start or to use in clinical
trials;
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lack
of adequate funding to continue a trial, including the incurrence of unforeseen costs due to enrollment delays, requirements
to conduct additional studies or increased expenses associated with the services of our CROs and other third parties; or
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changes
in governmental regulations or administrative actions or lack of adequate funding to continue a clinical trial.
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If
we experience delays in the completion or termination of any clinical trial of our product candidate, the approval and commercial
prospects of our product candidate will be harmed, delaying our ability to generate product revenues from such product candidate
and our costs will most likely increase. The required regulatory approvals may also be delayed, thereby jeopardizing our ability
to commence product sales and generate revenues and the period of commercial exclusivity for our product may be decreased. Regulatory
approval of our product candidate may be denied for the same reasons that caused the delay.
Risks
associated with operating in foreign countries could materially adversely affect our product development.
We
may conduct future studies in countries outside of the U.S. Consequently, we may be subject to risks related to operating in foreign
countries. Risks associated with conducting operations in foreign countries include:
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differing
regulatory requirements for drug approvals and regulation of approved drugs in foreign countries; more stringent privacy requirements
for data to be supplied to our operations in the U.S., e.g., General Data Protection Regulation in the European Union;
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unexpected
changes in tariffs, trade barriers and regulatory requirements; economic weakness, including inflation, or political instability
in particular foreign economies and markets; compliance with tax, employment, immigration and labor laws for employees living
or traveling abroad; foreign taxes, including withholding of payroll taxes;
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differing
payor reimbursement regimes, governmental payors or patient self-pay systems and price controls;
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foreign
currency fluctuations, which could result in increased operating expenses or reduced revenues, and other obligations incident
to doing business or operating in another country;
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workforce
uncertainty in countries where labor unrest is more common than in the U.S.;
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production
shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
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business
interruptions resulting from geopolitical actions, including war and terrorism.
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Our
current and future product candidates, the methods used to deliver them or their dosage levels may cause undesirable side effects
or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label
or result in significant negative consequences following any regulatory approval.
Undesirable
side effects caused by our current or future product candidates, their delivery methods or dosage levels could cause us or regulatory
authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of
regulatory approval or termination of clinical trials by the FDA or other comparable foreign regulatory authorities; or an IRB,
that approves and, monitors biomedical research to protect the rights and welfare of human subjects. As a result of safety or
toxicity issues that we may experience in our clinical trials, or negative or inconclusive results from the clinical trials of
others for drug candidates similar to our own, we may not receive approval to market our current product candidate or any product
candidates we may pursue, which could prevent us from ever generating revenues or achieving profitability. Results of our trials
could reveal an unacceptably high severity and incidence of side effects. In such an event, our trials could be suspended or terminated,
and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our
current or any future product candidates for any or all targeted indications. The drug-related side effects could also affect
patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims.
Any of these occurrences may have a material adverse effect on our business, results of operations, financial condition, cash
flows and future prospects.
Additionally,
if our product candidate receives regulatory approval, and we or others later identify undesirable side effects caused by such
product, a number of potentially significant negative consequences could result, including that:
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we
may be forced to suspend marketing of such product;
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regulatory
authorities may withdraw their approvals of such product;
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regulatory
authorities may require additional warnings on the label that could diminish the usage or otherwise limit the commercial success
of such product;
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we
may be required to conduct post-marketing studies;
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we
may be required to change the way the product is administered;
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we
could be sued and held liable for harm caused to subjects or patients; and
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our
reputation may suffer.
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Any
of these events could prevent us from achieving or maintaining market acceptance of our product candidate, if approved.
Our
product development program may not uncover all possible adverse events that patients who take our product candidate may experience.
The number of subjects exposed to our product candidate and the average exposure time in the clinical development program may
be inadequate to detect rare adverse events or chance findings that may only be detected once the product is administered to more
patients and for greater periods of time.
Clinical
trials by their nature utilize a sample of the potential patient population. However, with a limited number of subjects and limited
duration of exposure, we cannot be fully assured that rare and severe side effects of our product candidate will be uncovered.
Such rare and severe side effects may only be uncovered with a significantly larger number of patients exposed to our product
candidate. If such safety problems occur or are identified after our product candidate reaches the market, the FDA may require
that we amend the labeling of the product or recall the product, or may even withdraw approval for the product.
Our
future success is dependent on the regulatory approval of our product candidate.
Our
business is dependent on our ability to obtain regulatory approval for our product candidate in a timely manner. We cannot commercialize
our product candidate in the U.S. without first obtaining regulatory approval for the product from the FDA. Similarly, we cannot
commercialize our product candidate outside of the U.S. without obtaining regulatory approval from comparable foreign regulatory
authorities. Before obtaining regulatory approvals for the commercial sale of our product candidate for a target indication, we
must demonstrate with substantial evidence gathered in preclinical studies and clinical trials, that the product candidate is
safe and effective for use for that target indication and that the manufacturing facilities, processes and controls are adequate
with respect to such product candidate.
The
time required to obtain approval by the FDA and comparable foreign regulatory authorities is unpredictable but typically takes
many years following the commencement of preclinical studies and clinical trials and depends upon numerous factors, including
the substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount
of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and
may vary among jurisdictions.
Even
if a product candidate were to successfully obtain approval from the FDA and comparable foreign regulatory authorities, any approval
might contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications,
or may be subject to burdensome post-approval study or risk management requirements. Also, any regulatory approval of our current
product candidate or any future product candidates we may pursue, once obtained, may be withdrawn.
Our
current product candidate and future product candidates could fail to receive regulatory approval from the FDA.
We
have not obtained regulatory approval for our product candidate and it is possible that our existing product candidate or any
future product candidates will not obtain regulatory approval, for many reasons, including:
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disagreement
with the regulatory authorities regarding the scope, design or implementation of our clinical trials;
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failure
to demonstrate that a product candidate is safe and effective for our proposed indication;
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failure
of clinical trials to meet the level of statistical significance required for approval;
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failure
to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
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disagreement
with our interpretation of data from preclinical studies or clinical trials;
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the
insufficiency of data collected from clinical trials of our product candidate to support the submission and filing of a BLA,
NDA or other submission or to obtain regulatory approval;
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failure
to obtain approval of our manufacturing processes or facilities of third-party manufacturers with whom we contract for clinical
and commercial supplies or our own manufacturing facility; or
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changes
in the approval policies or regulations that render our preclinical and clinical data insufficient for approval.
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The
FDA or a comparable foreign regulatory authority may require more information, including additional preclinical or clinical data
to support approval or additional studies, which may delay or prevent approval and our commercialization plans, or we may decide
to abandon the development program. If we were to obtain approval, regulatory authorities may approve our current product candidate
and any future product candidates we may pursue for fewer or more limited indications than we request (including failing to approve
the most commercially promising indications), may grant approval contingent on the performance of costly post-marketing clinical
trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the
successful commercialization of that product candidate.
If
we are unable to obtain regulatory approval for our product candidate in one or more jurisdictions, or any approval contains significant
limitations, we may not be able to obtain sufficient funding to continue the development of that product or generate revenues
attributable to that product candidate.
Failure
to obtain regulatory approval in international jurisdictions would prevent our product candidate from being marketed abroad.
In
addition to regulations in the U.S., to market and sell our product candidate in the European Union, United Kingdom, many Asian
countries and other jurisdictions, we must obtain separate regulatory approvals and comply with numerous and varying regulatory
requirements. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and
approval by one regulatory authority outside the U.S. does not ensure approval by regulatory authorities in other countries or
jurisdictions or by the FDA. The regulatory approval process outside the U.S. generally includes all of the risks associated with
obtaining FDA approval as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. The approval
procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially
from that required to obtain FDA approval. We may not be able to obtain approvals from regulatory authorities outside the U.S.
on a timely basis, if at all. Clinical trials accepted in one country may not be accepted by regulatory authorities in other countries.
In addition, many countries outside the U.S. require that a product be approved for reimbursement before it can be approved for
sale in that country. A product candidate that has been approved for sale in a particular country may not receive reimbursement
approval in that country.
We
may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our product in any market.
If we are unable to obtain approval of any of our current product candidate or any future product candidates we may pursue by
regulatory authorities in the European Union, United Kingdom, Asia or elsewhere, the commercial prospects of that product candidate
may be significantly diminished, our business prospects could decline and this could materially adversely affect our business,
results of operations and financial condition.
Even
if our current candidate receive regulatory approval, it may still face future development and regulatory difficulties.
Even
if we obtain regulatory approval for our product candidate, that approval would be subject to ongoing requirements by the FDA
and comparable foreign regulatory authorities governing the manufacture, quality control, further development, labeling, packaging,
storage, distribution, adverse event reporting, safety surveillance, import, export, advertising, promotion, recordkeeping and
reporting of safety and other post-marketing information. These requirements include submissions of safety and other post-marketing
information and reports, registration, as well as continued compliance by us and/or our CMOs and CROs for any post-approval clinical
trials that we may conduct. The safety profile of any product will continue to be closely monitored by the FDA and comparable
foreign regulatory authorities after approval. If the FDA or comparable foreign regulatory authorities become aware of new safety
information after approval of our product candidate, they may require labeling changes or establishment of a risk evaluation and
mitigation strategy, impose significant restrictions on such product’s indicated uses or marketing or impose ongoing requirements
for potentially costly post-approval studies or post-market surveillance.
In
addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the
FDA and other regulatory authorities for compliance with cGMP, GCP, and other regulations. If we or a regulatory agency discover
previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the
facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility
or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If we, our product
candidate or the manufacturing facilities for our product candidate fail to comply with applicable regulatory requirements, a
regulatory agency may:
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issue
warning letters or untitled letters;
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mandate
modifications to promotional materials or require us to provide corrective information to healthcare practitioners;
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require
us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required
due dates for specific actions and penalties for noncompliance;
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seek
an injunction or impose civil or criminal penalties or monetary fines;
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suspend
or withdraw regulatory approval;
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suspend
any ongoing clinical trials;
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refuse
to approve pending applications or supplements to applications filed by us;
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suspend
or impose restrictions on operations, including costly new manufacturing requirements; or
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seize
or detain products, refuse to permit the import or export of products, or require us to initiate a product recall.
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The
occurrence of any event or penalty described above may inhibit our ability to successfully commercialize our product and generate
revenues.
Advertising
and promotion of any product candidate that obtains approval in the U.S. is heavily scrutinized by the FDA, the Department of
Justice, the Office of Inspector General of Health and Human Services, state attorneys general, members of Congress and the public.
A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance
with the provisions of the approved label. Additionally, advertising and promotion of any product candidate that obtains approval
outside of the U.S. is heavily scrutinized by comparable foreign regulatory authorities. Violations, including actual or alleged
promotion of our product for unapproved or off-label uses, are subject to enforcement letters, inquiries and investigations, and
civil and criminal sanctions by the FDA, as well as prosecution under the federal False Claims Act. Any actual or alleged failure
to comply with labeling and promotion requirements may have a negative impact on our business.
Risks
Related to Our Manufacturing
We
have limited to no manufacturing, sales, marketing or distribution capability and must rely upon third parties for such.
We
currently have purchase orders with various third-party manufacturing facilities for production of our product candidate for research
and development and testing purposes. We depend on these manufacturers to meet our deadlines, quality standards and specifications.
Our reliance on third parties for the manufacture of our active pharmaceutical ingredient and drug product and, in the future,
any approved products, creates a dependency that could severely disrupt our research and development, our clinical testing, and
ultimately our sales and marketing efforts if the source of such supply proves to be unreliable or unavailable. If the contracted
manufacturing source is unreliable or unavailable, we may not be able to manufacture clinical drug supplies of our product candidate,
and our preclinical and clinical testing programs may not be able to move forward and our entire business plan could fail.
The
active pharmaceutical ingredient for our product candidate is currently sourced from Polypeptide Laboratories located in San Diego,
California. We believe this single source is currently capable of supplying all anticipated needs of our proposed clinical studies,
as well as initial commercial introduction. We will be developing a source or sources for drug product manufacturing. If we are
able to commercialize our product in the future, there is no assurance that our manufacturers will be able to meet commercialized
scale production requirements in a timely manner or in accordance with applicable standards or cGMP. Once the nature and scope
of additional indications and their commensurate drug product demands are established, we will seek secondary suppliers of both
the active pharmaceutical ingredient and drug product for our product candidate, but we cannot assure that such secondary suppliers
will be found on terms acceptable to us, or at all.
We
are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit supply of our
product candidate.
We
and our CMOs will need to conduct significant development work for our product candidate for each target indication for studies,
trials and commercial launch readiness. Developing commercially viable manufacturing processes is a difficult, expensive and uncertain
task, and there are risks associated with scaling to the level required for advanced clinical trials or commercialization, including
cost overruns, potential problems with process scale-up, process reproducibility, stability issues, consistency and timely availability
of reagents or raw materials. The manufacturing facilities in which our product candidate will be made could be adversely affected
by earthquakes and other natural disasters, medical pandemics, equipment failures, labor shortages, power failures, and numerous
other factors.
Additionally,
the process of manufacturing our product candidate is complex, highly regulated and subject to several risks, including but not
limited to:
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product
loss due to contamination, equipment failure or improper installation or operation of equipment, or vendor or operator error;
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reduced
production yields, product defects, and other supply disruptions due to deviations, even minor, from normal manufacturing
and distribution processes;
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unexpected
product defects; and
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microbial,
viral, or other contaminations in our product candidate or in the manufacturing facilities in which our product candidate
is made, which may result in the closure of such manufacturing facilities for an extended period of time to allow for the
investigation and remediation of the contamination.
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Any
adverse developments affecting manufacturing operations for our product candidate may result in shipment delays, inventory shortages,
lot failures, withdrawals or recalls or other interruptions in the supply of our drug substance and drug product, which could
delay the development of our product candidate. We may also have to write off inventory, incur other charges and expenses for
supply of drug product that fails to meet specifications, undertake costly remediation efforts, or seek more costly manufacturing
alternatives. Inability to meet the demand for our product candidate could damage our reputation and the reputation of our product
among physicians, healthcare payors, patients or the medical community, and cancer treatment centers, which could adversely affect
our ability to operate our business and our results of operations.
In
the clinical trials using GP2, GM-CSF is also administered and its availability is dependent upon a third-party manufacturer,
which may or may not reliably provide GM-CSF, thus jeopardizing the completion of the trials.
GP2
is administered in combination with GM-CSF which is available in both liquid and lyophilized forms exclusively from one manufacturer.
We will continue to be dependent on such manufacturer for our supply of GM-CSF in combination with GP2 in the ongoing GP2 trials
and upon the potential commercialization of GP2. We have not entered into a supply agreement with the manufacturer for GM-CSF,
and instead rely on purchase orders to meet our supply needs. Any temporary interruptions or discontinuation of the availability
of GM-CSF could have a material adverse effect on our operations.
If
any of our CMOs’ clinical manufacturing facilities are damaged or destroyed or production at such facilities is otherwise
interrupted, our business and prospects would be negatively affected.
If
our CMOs’ manufacturing facilities or the equipment in them is damaged or destroyed, we may not be able to quickly or inexpensively
replace our manufacturing capacity or replace it at all. In the event of a temporary or protracted loss of this facility or equipment,
we might not be able to transfer manufacturing to another CMO. Even if we could transfer manufacturing to another CMO, the shift
would likely be expensive and time-consuming, particularly because the new facility would need to comply with the necessary regulatory
requirements and we would need FDA approval before selling any products manufactured at that facility. Such an event could delay
our clinical trials or reduce our product sales.
Although
we do not currently maintain insurance coverage against damage to our property and to cover business interruption and research
and development restoration expenses, any insurance coverage we obtain in the future may not reimburse us, or may not be sufficient
to reimburse us, for any expenses or losses we may suffer. We may be unable to meet our requirements for our product candidate
if there were a catastrophic event or failure of our current manufacturing facility or processes.
Risks
Related to Our Dependence on Third Parties and Our License Agreements
We
rely on third parties to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry
out their contractual duties or meet expected deadlines, or if we lose any of our CROs or other key third-party vendors, we may
not be able to obtain regulatory approval for or commercialize our current or future product candidates on a timely basis, if
at all.
Our
internal capacity for clinical trial execution and management is limited and therefore we rely heavily on third parties. We have
relied upon and plan to continue to rely upon third-party CROs, vendors and contractors to monitor and manage data for our ongoing
preclinical and clinical programs. For example, our collaborating investigators along with their clinical and clinical operations
teams may manage the conduct of any future clinical trials for GP2 as well as perform the analysis, publication and presentation
of data and results related to this program.
We
plan to rely on CROs and other third-party vendors for all currently contemplated clinical studies. We rely on these parties for
the execution of our preclinical studies and clinical trials, including the proper and timely conduct of our clinical trials,
and we control only some aspects of their activities. Outsourcing these functions involves risk that third parties may not perform
to our standards, may not produce results or data in a timely manner or may fail to perform at all.
While
we may have agreements governing the commitments of our third-party vendor services, we will have limited influence over their
actual performance. Nevertheless, we will be responsible for ensuring that each of our trials is conducted in accordance with
the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs will not relieve us of our
regulatory responsibilities.
If
our Company, or any of our partners or CROs, fail to comply with applicable regulations and good clinical practices, the clinical
data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require
us to perform additional clinical trials before approving our regulatory applications. We cannot assure you that upon inspection
by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with applicable
requirements. In addition, our clinical trials must be conducted with product produced under cGMP and other requirements. We are
also required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored
database, clinicaltrials.gov, within a specified timeframe. Failure to comply also would violate federal requirements in
the U.S. and could result in other penalties, which would delay the regulatory approval process and result in adverse publicity.
Our
CROs, third-party vendors and contractors are not and will not be our employees, and except for remedies available to us under
our agreements with such CROs, third-party vendors and contractors, we cannot control whether or not they devote sufficient time
and resources, including experienced staff, to our ongoing clinical, nonclinical and preclinical programs. They may also have
relationships with other entities, some of which may be our competitors. If CROs, third-party vendors and contractors do not successfully
carry out their contractual duties or obligations or meet expected deadlines or if the quality or accuracy of the clinical data
they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons,
our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully
commercialize our current or future product candidates. CRO, vendor or contractor errors could cause our results of operations
and the commercial prospects for our current or future product candidates to be harmed, our costs to increase and our ability
to generate revenues to be delayed.
In
addition, the use of third-party service providers requires us to disclose our proprietary information to these parties, which
could increase the risk that this information will be misappropriated. To the extent we are unable to identify and successfully
manage the performance of third-party service providers in the future, our business may be adversely affected. Though, once engaged,
we intend to carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges
or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial
condition and prospects.
We
are dependent on technologies we license, and if we lose the right to license such technologies or we fail to license new technologies
in the future, our ability to develop new products would be harmed, and if we fail to meet our obligations under our license agreements,
we may lose the ability to develop our product candidate.
We
currently are dependent on a license from HJF for technologies relating to our product candidate. The license imposes, and any
future licenses we enter into are likely to impose, various development, funding, royalty, diligence, sublicensing, insurance
and other obligations on us. If our license with respect to any of these technologies is terminated for any reason, the development
of the products contemplated by the licenses would be delayed, or suspended altogether, while we seek to license similar technology
or develop new non-infringing technology which could have a material adverse effect on our business.
We
may not realize the benefits of our strategic alliances that we may form in the future.
We
may form strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties
that we believe will complement or augment our existing business. These relationships, or those like them, may require us to incur
nonrecurring and other charges, increase our near- and long-term expenditures, issue securities that dilute our existing stockholders
or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic alliances
and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic
alliance or other alternative arrangements for or current product candidate or any future product candidates and programs because
our research and development pipeline may be insufficient, our current product candidate and future product candidates and programs
may be deemed to be at too early a stage of development for collaborative effort and third parties may not view such product candidates
and programs as having the requisite potential to demonstrate safety and efficacy. If we license products or acquire businesses,
we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing
operations and company culture. We cannot be certain that, following a strategic transaction or license, we will achieve the revenues
or specific net income that justifies such transaction. Any delays in entering into new strategic alliances agreements related
to our current product candidate or future product candidates could also delay the development and commercialization of such product
candidates and reduce their competitiveness even if they reach the market.
Our
business involves the use of hazardous materials and we and our third-party manufacturers and suppliers must comply with environmental,
health and safety laws and regulations, which can be expensive and restrict how we do business.
Our
third-party manufacturers’ and suppliers’ activities involve the controlled storage, use and disposal of hazardous
materials. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage,
handling and disposal of these hazardous materials even after we sell or otherwise dispose of the products. In some cases, these
hazardous materials and various wastes resulting from their use will be stored at our contractors or manufacturers’ facilities
pending use and disposal. We cannot completely eliminate the risk of contamination, which could cause injury to our employees
and others, environmental damage resulting in costly cleanup and liabilities under applicable laws and regulations governing the
use, storage, handling and disposal of these materials and specified waste products. Although we expect that the safety procedures
utilized by our third-party contractors and manufacturers for handling and disposing of these materials will generally comply
with the standards prescribed by these laws and regulations, we cannot guarantee that this will be the case or eliminate the risk
of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages
and such liability could exceed our resources. We do not currently carry biological or hazardous waste insurance coverage and
any future property and casualty, and general liability insurance policies may exclude coverage for damages and fines arising
from biological or hazardous waste exposure or contamination.
We
may not be able to establish or maintain the third-party relationships that are necessary to develop or potentially commercialize
our product candidate.
We
expect to depend on collaborators, partners, licensees, CROs and other third parties to formulate our product candidate, to manufacture
our product candidate, and to conduct clinical trials for our product candidate. We cannot guarantee that we will be able to successfully
negotiate agreements for or maintain relationships with collaborators, partners, licensees, clinical investigators, vendors and
other third parties on favorable terms, if at all. Our ability to successfully negotiate such agreements will depend on, among
other things, potential partners’ evaluation of the superiority of our technology over competing technologies and the quality
of the preclinical and clinical data that we have generated, and the perceived risks specific to developing our product candidate.
If we are unable to obtain or maintain these agreements, we may not be able to clinically develop, formulate, manufacture, obtain
regulatory approvals for or commercialize our product candidate. We cannot necessarily control the amount or timing of resources
that our contract partners will devote to our product candidate, and we cannot guarantee that these parties will fulfill their
obligations to us under these arrangements in a timely fashion. We may not be able to readily terminate any such agreements with
contract partners even if such contract partners do not fulfill their obligations to us.
In
addition, we may receive notices from third parties from time to time alleging that our technology or product candidate infringes
upon the intellectual property rights of those third parties. Any assertion by third parties that our activities or product candidate
infringes upon the intellectual property rights of third parties may adversely affect our ability to secure strategic partners
or licensees for our technology or product candidate or our ability to secure or maintain manufacturers for our compounds.
Risks
Related to Our Intellectual Property
We
rely on an exclusive license granted to us by HJF with respect to GP2, and if HJF does not adequately defend such license, our
business may be harmed.
We
have been granted an exclusive license to GP2, our product candidate, from HJF. The GP2 patent rights were assigned to HJF by
certain third parties including the Uniformed Services University of the Health Sciences. We rely on HJF to maintain the patents
already issued with respect to GP2, to continue to pursue patent applications pending in certain countries with respect to GP2,
and otherwise protect the intellectual property covered by our exclusive license agreement. We have limited control over the activities
of HJF or over any other intellectual property that may be related to GP2. For example, we cannot be certain that activities by
HJF have been or will be conducted in compliance with applicable laws and regulations and/or any agreements between HJF and the
third party assignors. We have no control or input over whether, and in what manner, HJF may enforce or defend the patents against
a third-party. HJF may enforce or defend the patent less vigorously than if we had enforced or defended the patents ourselves.
Further, HJF may not necessarily seek enforcement in scenarios in which we would feel that enforcement was in our best interests.
For example, HJF may not enforce the patents against a competitor of ours who is not a direct competitor of HJF. If our in-licensed
intellectual property is found to be invalid or unenforceable, then HJF may not be able to enforce the patents against a competitor
of ours. If we fail to meet our obligations under our exclusive license agreement with HJF, then HJF may terminate such agreement.
Although we may choose to terminate our license agreement with HJF, doing so would allow a third party to seek and obtain an exclusive
license to GP2. If a third party obtains an exclusive license to intellectual property with respect to GP2, then the third party
may seek to enforce the intellectual property against us which may have a material adverse effect on our business.
It
is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection. If our patent position
does not adequately protect our product candidate, others could compete against us more directly, which would harm our business,
possibly materially.
Our
commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of our current
product candidate and future product candidates, the processes used to manufacture them and the methods for using them, as well
as successfully defending these patents against third-party challenges. As of the date of this prospectus, we only have licensed
rights from HJF to certain issued patents as well as patent applications which are currently pending in certain countries with
respect to GP2. Our ability to stop third parties from making, using, selling, offering to sell or importing our product candidate
is dependent upon the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.
The
patent positions of biotechnology and pharmaceutical companies can be highly uncertain and involve complex legal and factual questions
for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in pharmaceutical
patents has emerged to date in the U.S. or in foreign jurisdictions outside of the U.S. Changes in either the patent laws or interpretations
of patent laws in the U.S. and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict
the breadth of claims that may be enforced in the patents that may be issued from the applications we currently or may in the
future own or license from third parties. Further, if any patents we obtain or license are deemed invalid and unenforceable, our
ability to commercialize or license our technology could be adversely affected.
Others
have filed, and in the future are likely to file, patent applications covering products and technologies that are similar, identical
or competitive to ours or important to our business. We cannot be certain that any patent application owned by a third party will
not have priority over patent applications filed or in-licensed by us, or that we or our licensors will not be involved in interference,
opposition, reexamination, review, reissue, post grant review or invalidity proceedings before U.S. or non-U.S. patent offices.
The
degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may
not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:
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others
may be able to make compounds that are similar to our product candidate, but that are not covered by the claims of our licensed
patents;
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HJF
might not have been the first to make the inventions covered by its pending patent applications;
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we
or HJF might not have been the first to file patent applications for these inventions;
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HJF’s
pending patent applications may not result in issued patents;
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the
claims of HJF’s issued patents or patent applications when issued may not cover our product or product candidate;
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any
patents that we obtain from licensing or otherwise may not provide us with any competitive advantages;
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any
granted patents that we rely upon may be held invalid or unenforceable as a result of legal challenges by third parties; and
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the
patents of others may have an adverse effect on our business.
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If
we fail to comply with our obligations in the agreements under which we may license intellectual property rights from third parties
or otherwise experience disruptions to our business relationships with our licensors, we could lose rights that are important
to our business.
We
may be required to enter into intellectual property license agreements that are important to our business. These license agreements
may impose various diligence, milestone payment, royalty and other obligations on us. For example, we may enter into exclusive
license agreements with various universities and research institutions, we may be required to use commercially reasonable efforts
to engage in various development and commercialization activities with respect to licensed products, and may need to satisfy specified
milestone and royalty payment obligations. If we fail to comply with any obligations under our agreements with any of these licensors,
we may be subject to termination of the license agreement in whole or in part; increased financial obligations to our licensors
or loss of exclusivity in a particular field or territory, in which case our ability to develop or commercialize products covered
by the license agreement will be impaired.
In
addition, disputes may arise regarding intellectual property subject to a license agreement, including:
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the
scope of rights granted under the license agreement and other interpretation-related issues;
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the
extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the
licensing agreement;
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our
diligence obligations under the license agreement and what activities satisfy those obligations;
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if
a third-party expresses interest in an area under a license that we are not pursuing, under the terms of certain of our license
agreements, we may be required to sublicense rights in that area to a third party, and that sublicense could harm our business;
and
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the
ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and
us.
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If
disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements
on acceptable terms, we may be unable to successfully develop and commercialize our product candidate.
We
may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidate. We
may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable
to further develop and commercialize our product candidate, which could harm our business significantly.
We
may incur substantial costs as a result of litigation or other proceedings relating to patents and other intellectual property
rights.
If
we choose to commence a proceeding or litigation to prevent another party from infringing HJF’s patents, that party will
have the right to ask the examiner or court to rule that such patents are invalid or should not be enforced against them. There
is a risk that the examiner or court will decide that HJF’s patents are not valid and that HJF does not have the right to
stop the other party from using the related inventions. There is also the risk that, even if the validity of such patents is upheld,
the examiner or court will refuse to stop the other party on the ground that such other party’s activities do not infringe
our rights to such patents. In addition, the U.S. Supreme Court has recently modified some tests used by the U.S. Patent and Trademark
Office (the “USPTO”) in granting patents over the past 20 years, which may decrease the likelihood that we or HJF
will be able to obtain patents and increase the likelihood of challenge to any patents we obtain or license. Any proceedings or
litigation to enforce our intellectual property rights or defend ourselves against claims of infringement of third-party intellectual
property rights could be costly and divert the attention of managerial and scientific personnel, regardless of whether such litigation
is ultimately resolved in our favor. We may not have sufficient resources to bring these actions to a successful conclusion. Moreover,
if we are unable to successfully defend against claims that we have infringed the intellectual property rights of others, we may
be prevented from using certain intellectual property and may be liable for damages, which in turn could materially adversely
affect our business, financial condition or results of operations.
We
may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us
from commercializing or increase the costs of commercializing our product candidate.
Our
success will depend in part on our ability to operate without infringing the proprietary rights of third parties. We cannot guarantee
that our product candidate, or manufacture or use of our product candidate, will not infringe third-party patents. Furthermore,
a third party may claim that we are using inventions covered by the third party’s patent rights and may go to court to stop
us from engaging in our normal operations and activities, including making or selling our product candidate. These lawsuits are
costly and could affect our results of operations and divert the attention of managerial and scientific personnel. Some of these
third parties may be better capitalized and have more resources than us. 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 that event, we
may not have a viable way around the patent and may need to halt commercialization of our product candidate. In addition, there
is a risk that a court will order us to pay the other party damages for having violated the other party’s patents. In addition,
we may be obligated to indemnify our licensors and collaborators against certain intellectual property infringement claims brought
by third parties, which could require us to expend additional resources. The pharmaceutical and biotechnology industries have
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.
If
we are sued for patent infringement, we would need to demonstrate that our product candidate or methods either do not infringe
the patent claims of the relevant patent or that the patent claims are invalid, and we may not be able to do this. Proving invalidity
is difficult. For example, in the U.S., proving invalidity requires a showing of clear and convincing evidence to overcome the
presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs
and divert management’s time and attention in pursuing these proceedings, which could have a material adverse effect on
us. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, which may not be available,
defend an infringement action or challenge the validity of the patents in court. Patent litigation is costly and time consuming.
We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license,
develop or obtain non-infringing technology, fail to defend an infringement action successfully or have infringed patents declared
invalid, we may incur substantial monetary damages, encounter significant delays in bringing our product candidate to market and
be precluded from manufacturing or selling our product candidate.
We
cannot be certain that others have not filed patent applications for technology covered by HJF’s pending applications, or
that HJF the first to invent the technology, because:
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some
patent applications in the U.S. may be maintained in secrecy until the patents are issued;
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patent
applications in the U.S. are typically not published until 18 months after the priority date; and
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publications
in the scientific literature often lag behind actual discoveries.
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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 HJF’s patent applications, which could require us to obtain rights to issued patents
covering such technologies. If another party has filed U.S. patent applications on inventions similar to HJF that claims priority
to any applications filed prior to the priority dates of HJF’s applications, HJF may have to participate in an interference
proceeding declared by the USPTO to determine priority of invention in the U.S. It is possible that such efforts would be unsuccessful
if, unbeknownst to HJF, the other party had independently arrived at the same or similar inventions prior to HFJ’s inventions,
resulting in a loss of HFJ’s U.S. patent position with respect to such inventions which could in turn have a material adverse
effect on our operations. Other countries have similar laws that permit secrecy of patent applications, and may be entitled to
priority over our applications in such jurisdictions.
Some
of our competitors may be able to sustain the costs of complex patent litigation more effectively than us or the third parties
from whom we license intellectual property 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 funds
necessary to continue our operations.
If
we are not able to adequately prevent disclosure of trade secrets and other proprietary information, the value of our technology
and product could be significantly diminished.
We
also rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is appropriate
or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees,
consultants, outside scientific collaborators, sponsored researchers and other advisors to protect our trade secrets and other
proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide
an adequate remedy in the event of unauthorized disclosure of confidential information. Furthermore, any license agreements we
enter into in the future may require us to notify, and in some cases license back to the licensor, certain additional proprietary
information or intellectual property that we developed using the rights licensed to us under these agreements. Any such licenses
back to the licensor could allow our licensors to use that proprietary information or intellectual property in a manner that could
harm our business. In addition, others may independently discover our trade secrets and proprietary information. For example,
the FDA, as part of its transparency initiative, is currently considering whether to make additional information publicly available
on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is
not clear at the present time how the FDA’s disclosure policies may change in the future, if at all. Costly and time-consuming
litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain
trade secret protection could adversely affect our competitive business position.
We
may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed alleged
trade secrets.
As
is common in the biotechnology and pharmaceutical industries, we employ individuals who were previously employed at other biotechnology
or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees,
consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we
may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used
or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against
these claims. If we fail in defending any such claims, in addition to paying monetary damages, we could lose valuable intellectual
property rights or personnel, which could adversely impact our business. Even if we are successful in defending against these
claims, litigation could result in substantial costs and be a distraction to management.
Our
intellectual property may not be sufficient to protect our product candidate from competition, which may negatively affect our
business as well as limit our partnership or acquisition appeal.
We
may be subject to competition despite the existence of intellectual property we license or own. We can give no assurances that
our intellectual property claims will be sufficient to prevent third parties from designing around patents we own or license and
developing and commercializing competitive products. The existence of competitive products that avoid our intellectual property
could materially adversely affect our operating results and financial condition. Furthermore, limitations, or perceived limitations,
in our intellectual property may limit the interest of third parties to partner, collaborate or otherwise transact with us, if
third parties perceive a higher than acceptable risk to commercialization of our product candidate or future product candidates.
We
may elect to sue a third party, or otherwise make a claim, alleging infringement or other violation of patents, trademarks, trade
dress, copyrights, trade secrets, domain names or other intellectual property rights that we either own or license from a third
party. If we do not prevail in enforcing our intellectual property rights in this type of litigation, we may be subject to:
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paying
monetary damages related to the legal expenses of the third party;
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facing
additional competition that may have a significant adverse effect on our product pricing, market share, business operations,
financial condition, and the commercial viability of our product; and
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restructuring
our company or delaying or terminating select business opportunities, including, but not limited to, research and development,
clinical trial, and commercialization activities, due to a potential deterioration of our financial condition or market competitiveness.
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third party may also challenge the validity, enforceability or scope of the intellectual property rights that we license or own;
and, the result of these challenges may narrow the scope or claims of or invalidate patents that are integral to our product candidate
in the future. There can be no assurance that we will be able to successfully defend patents we own or license in an action against
third parties due to the unpredictability of litigation and the high costs associated with intellectual property litigation, amongst
other factors.
Intellectual
property rights and enforcement may be less extensive in jurisdictions outside of the U.S.; thus, we may not be able to protect
our intellectual property and third parties may be able to market competitive products that may use some or all of our intellectual
property.
Changes
to patent law, including the Leahy-Smith America Invests Act, AIA or Leahy-Smith Act, of 2011 and the Patent Reform Act of 2009
and other future article of legislation, may substantially change the regulations and procedures surrounding patent applications,
issuance of patents, and prosecution of patents. We can give no assurances that the patents of our licensor can be defended or
will protect us against future intellectual property challenges, particularly as they pertain to changes in patent law and future
patent law interpretations.
In
addition, enforcing and maintaining our intellectual property protection depends on compliance with various procedural, document
submission, fee payment and other requirements imposed by the USPTO, courts and foreign government patent agencies, and HJF’s
patent protection could be reduced or eliminated for non-compliance with these requirements which may have a material adverse
effect on our business.
Risks
Related to Commercialization of Our Current Product Candidate and Future Product Candidates
Our
commercial success depends upon attaining significant market acceptance of our current product candidate and future product candidates,
if approved, among physicians, patients, healthcare payors and cancer treatment centers.
Even
if we obtain regulatory approval for our current product candidate or any future product candidates, the products may not gain
market acceptance among physicians, healthcare payors, patients or the medical community, including cancer treatment centers.
Market acceptance of any product candidates for which we receive approval depends on a number of factors, including:
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the
efficacy and safety of such product candidates as demonstrated in clinical trials;
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the
clinical indications and patient populations for which the product candidate is approved;
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acceptance
by physicians, major cancer treatment centers and patients of the drug as a safe and effective treatment;
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the
adoption of novel immunotherapies by physicians, hospitals and third-party payors;
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the
potential and perceived advantages of product candidates over alternative treatments;
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the
safety of product candidates seen in a broader patient group, including our use outside the approved indications;
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any
restrictions on use together with other medications;
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the
prevalence and severity of any side effects;
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product
labeling or product insert requirements of the FDA or other regulatory authorities;
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the
timing of market introduction of our product as well as competitive products;
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the
development of manufacturing and distribution processes for commercial scale manufacturing for our current product candidate
and any future product candidates;
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the
cost of treatment in relation to alternative treatments;
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the
availability of coverage and adequate reimbursement from third-party payors and government authorities;
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relative
convenience and ease of administration; and
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the
effectiveness of our sales and marketing efforts and those of our collaborators.
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If
our current product and any future product candidates are approved but fail to achieve market acceptance among physicians, patients,
healthcare payors or cancer treatment centers, we will not be able to generate significant revenues, which would compromise our
ability to become profitable.
Even
if we are able to commercialize our current product candidate or any future product candidates, the products may not receive coverage
and adequate reimbursement from third-party payors in the U.S. and in other countries in which we seek to commercialize our products,
which could harm our business.
Our
ability to commercialize any product successfully will depend, in part, on the extent to which coverage and adequate reimbursement
for such product and related treatments will be available from third-party payors, including government health administration
authorities, private health insurers and other organizations.
Third-party
payors determine which medications they will cover and establish reimbursement levels. A primary trend in the healthcare industry
is cost containment. Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for
particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts
from list prices and are challenging the prices charged for medical products. Third-party payors may also seek additional clinical
evidence, beyond the data required to obtain regulatory approval, demonstrating clinical benefit and value in specific patient
populations before covering our product for those patients. We cannot be sure that coverage and adequate reimbursement will be
available for any product that we commercialize and, if coverage is available, what the level of reimbursement will be. Coverage
and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain regulatory approval. If
reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize any product
candidate for which we obtain regulatory approval.
There
may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than
the purposes for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for
coverage and reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including
research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also
not be sufficient to cover our costs and may only be temporary. Reimbursement rates may vary according to the use of the drug
and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be
incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates
required by third-party payors and by any future relaxation of laws that presently restrict imports of drugs from countries where
they may be sold at lower prices than in the U.S. No uniform policy for coverage and reimbursement exists in the U.S., and coverage
and reimbursement can differ significantly from payor to payor. Third-party payors often rely upon Medicare coverage policy and
payment limitations in setting their own reimbursement policies, but also have their own methods and approval process apart from
Medicare determinations. Our inability to promptly obtain coverage and profitable reimbursement rates from both government-funded
and private payors for any approved product that we develop could have a material adverse effect on our operating results, ability
to raise capital needed to commercialize our product and overall financial condition.
Healthcare
legislative measures aimed at reducing healthcare costs may have a material adverse effect on our business and results of operations.
Third-party
payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling
healthcare costs. In both the U.S. and certain international jurisdictions, there have been a number of legislative and regulatory
changes to the health care system that could impact our ability to sell our product profitably. In particular, in 2010, the Affordable
Care Act (“ACA”) was enacted, which, among other things, subjected biologic products to potential competition by lower-cost
biosimilars, addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated
for drugs that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by most manufacturers
under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals
enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription
drugs, and provided incentives to programs that increase the federal government’s comparative effectiveness research. Since
its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts
by the current U.S. administration to repeal or repeal and replace certain aspects of the ACA. On December 14, 2018, a U.S. District
Court Judge in the Northern District of Texas, or the Texas District Court Judge, ruled that the individual mandate is a critical
and inseverable feature of the ACA, and therefore, because it was repealed as a part of the Tax Act, the remaining provisions
of the ACA are invalid as well. While the Texas District Court Judge, as well as the Trump Administration and CMS, have stated
that the ruling will have no immediate effect, it is unclear how this decision, subsequent appeals and other efforts to repeal
and replace the ACA will impact the ACA. Until there is more certainty concerning the future of the ACA, it will be difficult
to predict its full impact and influence on our business.
In
addition, other legislative changes have been proposed and adopted in the U.S. since the ACA was enacted. In August 2011, the
Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee
on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through
2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government
programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in
2013, and will remain in effect through 2027 unless additional Congressional action is taken. The American Taxpayer Relief Act
of 2012 further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased
the statute of limitations period for the government to recover overpayments to providers from three to five years.
There
have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed
at containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing
efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain
or reduce costs of healthcare and/or impose price controls may adversely affect:
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the
demand for our product candidate, if we obtain regulatory approval;
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our
ability to receive or set a price that we believe is fair for our product;
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our
ability to generate revenue and achieve or maintain profitability;
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the
level of taxes that we are required to pay; and
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the
availability of capital.
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We
expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions
in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement and new payment methodologies.
This could lower the price that we receive for any approved product. Any denial in coverage or reduction in reimbursement from
Medicare or other government-funded programs may result in a similar denial or reduction in payments from private payors, which
may prevent us from being able to generate sufficient revenue, attain profitability or commercialize our product candidate, if
approved.
Price
controls may be imposed in foreign markets, which may adversely affect our future profitability.
In
some countries, particularly member states of the European Union, the pricing of prescription drugs is subject to governmental
control. In these countries, pricing negotiations with governmental authorities can take considerable time after receipt of regulatory
approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement
levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate
pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various
European Union member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further
reduce prices.
In
some countries, we or our collaborators may be required to conduct a clinical trial or other studies that compare the cost-effectiveness
of our product candidate to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication
of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the
country of publication and other countries. If reimbursement of our product is unavailable or limited in scope or amount, or if
pricing is set at unsatisfactory levels, our business could be adversely affected.
Risks
Related to Healthcare Compliance Regulations
Our
relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare
laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and
diminished profits and future earnings. If we or they are unable to comply with these provisions, we may become subject to civil
and criminal investigations and proceedings that could have a material adverse effect on our business, financial condition and
prospects.
Healthcare
providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any product candidates
for which we obtain regulatory approval. Our current and future arrangements with healthcare providers, healthcare entities, third-party
payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain
the business or financial arrangements and relationships through which we research, develop and will market, sell and distribute
our product. As a pharmaceutical company, even though we do not and will not control referrals of healthcare services or bill
directly to Medicare, Medicaid or other third-party payors, federal and state healthcare laws and regulations pertaining to fraud
and abuse and patients’ rights are applicable to our business. Restrictions under applicable federal and state healthcare
laws and regulations that may affect our ability to operate include the following:
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the
federal healthcare Anti-Kickback Statute which prohibits, among other things, individuals and entities from knowingly and
willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, overtly or covertly, in cash
or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation
of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;
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federal
civil and criminal false claims laws, including the federal False Claims Act that can be enforced through civil whistleblower
or qui tam actions, and civil monetary penalty laws, prohibit individuals or entities from knowingly presenting, or causing
to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment or approval that
are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal
government;
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the
federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) which imposes criminal and civil
liability for executing a scheme to defraud any healthcare benefit program and also created federal criminal laws that prohibit
knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statements in
connection with the delivery of or payment for healthcare benefits, items or services, as amended by the Health Information
Technology for Economic and Clinical Health Act of 2009 (“HITECH”) which imposes obligations, including mandatory
contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health
information on entities subject to the law, such as certain healthcare providers, health plans, and healthcare clearinghouses,
known as covered entities, and their respective business associates that perform services for them that involve the creation,
use, maintenance or disclosure of, individually identifiable health information;
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the
federal physician sunshine requirements under the ACA which requires certain manufacturers of drugs, devices, biologics and
medical supplies, with certain exceptions, to report annually to HHS information related to payments and other transfers of
value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians
and other healthcare providers and their immediate family members and applicable group purchasing organizations;
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analogous
state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing
arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including
private insurers; some state laws which require pharmaceutical companies to comply with the pharmaceutical industry’s
voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require
drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare
providers, marketing expenditures or pricing information; and certain state and local laws which require the registration
of pharmaceutical sales representatives; and
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state
and foreign laws govern the privacy and security of health information in specified circumstances, many of which differ from
each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
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Efforts
to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve
substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with
current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations.
If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us,
we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, disgorgement, exclusion
from government funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, and
the curtailment or restructuring of our operations. If any physicians or other healthcare providers or entities with whom we expect
to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative
sanctions, including exclusions from government funded healthcare programs.
Our
employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements,
which could cause significant liability for us and harm our reputation.
We
are exposed to the risk of employee fraud or other misconduct, including intentional failures to comply with FDA regulations or
similar regulations of comparable foreign regulatory authorities, provide accurate information to the FDA or comparable foreign
regulatory authorities, comply with manufacturing standards we have established, comply with federal and state healthcare fraud
and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities,
report financial information or data accurately or disclose unauthorized activities to us. Employee misconduct could also involve
the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious
harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect
and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental
investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any
such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions
could have a significant impact on our business and results of operations, including the imposition of significant civil, criminal
and administrative penalties, damages, fines, imprisonment, exclusion from government funded healthcare programs, such as Medicare
and Medicaid, and integrity oversight and reporting obligations.
Product
liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that
we may develop.
We
face an inherent risk of product liability exposure related to the testing of our current product candidate or future product
candidates in human clinical trials and will face an even greater risk if we commercially sell any products that we may develop.
Product liability claims may be brought against us by subjects enrolled in our clinical trials, patients, healthcare providers
or others using, administering or selling our product. If we cannot successfully defend ourselves against claims that our product
candidate or product caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability
claims may result in:
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decreased
demand for any product candidates or products that we may develop;
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termination
of clinical trial sites or entire clinical trial programs;
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injury
to our reputation and significant negative media attention;
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withdrawal
of clinical trial participants;
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significant
costs to defend the related litigation;
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substantial
monetary awards to trial subjects or patients;
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loss
of revenue;
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diversion
of management and scientific resources from our business operations; and
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the
inability to commercialize any products that we may develop.
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Prior
to engaging in future clinical trials, we intend to obtain product liability insurance coverage at a level that we believe is
customary for similarly situated companies and adequate to provide us with insurance coverage for foreseeable risks; however,
we may be unable to obtain such coverage at a reasonable cost, if at all. If we are able to obtain product liability insurance,
we may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that
may arise and such insurance may not be adequate to cover all liabilities that we may incur. Furthermore, we intend to expand
our insurance coverage for products to include the sale of commercial products if we obtain regulatory approval for our product
candidate in development, but we may be unable to obtain commercially reasonable product liability insurance for any products
that receive regulatory approval. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated
side effects. A successful product liability claim or series of claims brought against us, particularly if judgments exceed our
insurance coverage, could decrease our cash and adversely affect our business.
Risks
Related to our Business Operations
We
face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully
than we do.
We
face competition from numerous pharmaceutical and biotechnology enterprises, as well as from academic institutions, government
agencies and private and public research institutions for our current product candidate. Our commercial opportunities will be
reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer side effects
or are less expensive than any products that we may develop. Competition could result in reduced sales and pricing pressure on
our current product candidate, if approved, which in turn would reduce our ability to generate meaningful revenues and have a
negative impact on our results of operations. In addition, significant delays in the development of our product candidate could
allow our competitors to bring products to market before we do and impair our ability to commercialize our product candidate.
The biotechnology industry, including the cancer immunotherapy market, is intensely competitive and involves a high degree of
risk. We compete with other companies that have far greater experience and financial, research and technical resources than us.
Potential competitors in the U.S. and worldwide are numerous and include pharmaceutical and biotechnology companies, educational
institutions and research foundations, many of which have substantially greater capital resources, marketing experience, research
and development staffs and facilities than ours. Some of our competitors may develop and commercialize products that compete directly
with those incorporating our technology or may introduce products to market earlier than our product or on a more cost-effective
basis. Our competitors compete with us in recruiting and retaining qualified scientific and management personnel as well as in
acquiring technologies complementary to our technology. We may face competition with respect to product efficacy and safety, ease
of use and adaptability to various modes of administration, acceptance by physicians, the timing and scope of regulatory approvals,
availability of resources, reimbursement coverage, price and patent position, including the potentially dominant patent positions
of others. An inability to successfully complete our product development or commercializing our product candidate could result
in our having limited prospects for establishing market share or generating revenue.
Many
of our competitors or potential competitors have significantly greater established presence in the market, financial resources
and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory
approvals and marketing approved products than we do, and as a result may have a competitive advantage over us. Mergers and acquisitions
in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number
of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative
arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific
and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring
technologies and technology licenses complementary to our programs or potentially advantageous to our business.
As
a result of these factors, these competitors may obtain regulatory approval of their products before we are able to obtain patent
protection or other intellectual property rights, which will limit our ability to develop or commercialize our current product
candidate. Our competitors may also develop drugs that are safer, more effective, more widely used and cheaper than ours, and
may also be more successful than us in manufacturing and marketing their products. These appreciable advantages could render our
product candidate obsolete or noncompetitive before we can recover the expenses of development and commercialization.
Our
business may be adversely affected by the ongoing coronavirus pandemic.
The
outbreak of the novel coronavirus (COVID-19) has evolved into a global pandemic. The coronavirus has spread to many regions of
the world. The extent to which the coronavirus impacts our business and operating results will depend on future developments that
are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the coronavirus
and the actions to contain the coronavirus or treat its impact, among others.
As
a result of the continuing spread of the coronavirus, our business operations could be delayed or interrupted. For instance, our
clinical trials may be affected by the pandemic. Site initiation, participant recruitment and enrollment, participant dosing,
distribution of clinical trial materials, study monitoring and data analysis may be paused or delayed due to changes in hospital
or university policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or
other reasons related to the pandemic. If the coronavirus continues to spread, some participants and clinical investigators may
not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or
required) may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, and we may
be unable to conduct our clinical trials. Further, if the spread of the coronavirus pandemic continues and our operations are
adversely impacted, we risk a delay, default and/or nonperformance under existing agreements which may increase our costs. These
cost increases may not be fully recoverable or adequately covered by insurance.
Infections
and deaths related to the pandemic may disrupt the United States’ healthcare and healthcare regulatory systems. Such disruptions
could divert healthcare resources away from, or materially delay FDA review and/or approval with respect to, our clinical trials.
It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of our clinical
trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of our
product candidates.
We
currently utilize third parties to, among other things, manufacture raw materials. If any third-party parties in the supply chain
for materials used in the production of our product candidates are adversely impacted by restrictions resulting from the coronavirus
outbreak, our supply chain may be disrupted, limiting our ability to manufacture our product candidates for our clinical trials
and research and development operations.
As
a result of the shelter-in-place order and other mandated local travel restrictions, our employees conducting research and development
or manufacturing activities may not be able to access their laboratory or manufacturing space which may result in our core activities
being significantly limited or curtailed, possibly for an extended period of time.
The
spread of the coronavirus, which has caused a broad impact globally, including restrictions on travel and quarantine policies
put into place by businesses and governments, may have a material economic effect on our business. While the potential economic
impact brought by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely
to result in further, significant disruption of global financial markets, which may reduce our ability to access capital either
at all or on favorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the
spread of the coronavirus could materially and adversely affect our business and the value of our common stock.
The
ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. We do not yet
know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems
or the global economy as a whole. However, these effects could have a material impact on our operations, and we will continue
to monitor the situation closely.
Significant
disruptions of information technology systems, computer system failures or breaches of information security could adversely affect
our business.
We
rely to a large extent upon sophisticated information technology systems to operate our business. In the ordinary course of business,
we collect, store and transmit large amounts of confidential information (including, but not limited to, personal information
and intellectual property). The size and complexity of our information technology and information security systems, and those
of our third-party vendors with whom we may contract, make such systems potentially vulnerable to service interruptions or to
security breaches from inadvertent or intentional actions by our employees or vendors, or from malicious attacks by third parties.
Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives
(including, but not limited to, industrial espionage and market manipulation) and expertise. While we intend to invest in the
protection of data and information technology, there can be no assurance that our efforts will prevent service interruptions or
security breaches.
Our
internal computer systems, and those of our CROs, our CMOs, and other business vendors on which we may rely, are vulnerable to
damage from computer viruses, unauthorized access, natural disasters, fire, terrorism, war and telecommunication and electrical
failures. We exercise little or no control over these third parties, which increases our vulnerability to problems with their
systems. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of
our drug development programs. Any interruption or breach in our systems could adversely affect our business operations and/or
result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial,
legal, business and reputational harm to us or allow third parties to gain material, inside information that they use to trade
in our securities. For example, the loss of clinical trial data from completed or ongoing clinical trials could result in delays
in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any
disruption or security breach results in a loss of or damage to our data or applications, or inappropriate disclosure of confidential
or proprietary information, we could incur liability, the further development of our current and future product candidates could
be delayed and our business could be otherwise adversely affected.
We
will need to grow the size of our organization in the future, and we may experience difficulties in managing this growth.
As
of December 1, 2020, we had no full-time employees and 3 part-time employees. We will need to grow the size of our organization
in order to support our continued development and potential commercialization of our product candidate. As our development and
commercialization plans and strategies continue to develop, our need for additional managerial, operational, manufacturing, sales,
marketing, financial and other resources may increase. Our management, personnel and systems currently in place may not be adequate
to support this future growth. Future growth would impose significant added responsibilities on members of management, including:
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managing
our clinical trials effectively;
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identifying,
recruiting, maintaining, motivating and integrating additional employees;
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managing
our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors
and other third parties;
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improving
our managerial, development, operational, information technology, and finance systems; and
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expanding
our facilities.
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If
our operations expand, we will also need to manage additional relationships with various strategic partners, suppliers and other
third parties. Our future financial performance and our ability to commercialize our product candidate and to compete effectively
will depend, in part, on our ability to manage any future growth effectively, as well as our ability to develop a sales and marketing
force when appropriate for our company. To that end, we must be able to manage our development efforts and preclinical studies
and clinical trials effectively and hire, train and integrate additional management, research and development, manufacturing,
administrative and sales and marketing personnel. The failure to accomplish any of these tasks could prevent us from successfully
growing our company.
Our
future success depends on our ability to retain our executive officers and to attract, retain and motivate qualified personnel.
We
are highly dependent upon our personnel, including Snehal Patel, our Chief Executive Officer and member of our board of directors.
The loss of Mr. Patel’s services could impede the achievement of our research, development and commercialization objectives.
We have not obtained, do not own, nor are we the beneficiary of, key-person life insurance. Our future growth and success depend
on our ability to recruit, retain, manage and motivate our employees. The loss of any member of our senior management team or
the inability to hire or retain experienced management personnel could compromise our ability to execute our business plan and
harm our operating results. Because of the specialized scientific and managerial nature of our business, we rely heavily on our
ability to attract and retain qualified scientific, technical and managerial personnel. The competition for qualified personnel
in the pharmaceutical field is intense and as a result, we may be unable to continue to attract and retain qualified personnel
necessary for the development of our business.
Inadequate
funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other
personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those
agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact
our business.
The
ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and
funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy
changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the
SEC and other government agencies on which our operations may rely, including those that fund research and development activities
is subject to the political process, which is inherently fluid and unpredictable.
Disruptions
at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government
agencies, which would adversely affect our business. For example, over the last several years, including beginning on December
22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had
to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown
occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could
have a material adverse effect on our business. Further, in our operations as a public company, future government shutdowns could
impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our
operations.
Risks
Related to Owning our Common Stock and this Offering
An
active trading market for our common stock may not develop, and you may not be able to sell your common stock at or above the
public offering price.
Prior
to the consummation of this offering, there has been limited trading in our common stock. An active trading market for shares
of our common stock may never develop or be sustained following this offering. If an active trading market does not develop, you
may have difficulty selling your shares of common stock at an attractive price, or at all. The price for our common stock in this
offering will be determined by negotiations between us and the underwriters, and it may not be indicative of prices that will
prevail in the open market following this offering. Consequently, you may not be able to sell your common stock at or above the
public offering price or at any other price or at the time that you would like to sell. An inactive market may also impair our
ability to raise capital by selling our common stock, and it may impair our ability to attract and motivate our employees through
equity incentive awards and our ability to acquire other companies, products or technologies by using our common stock as consideration.
The
price of our common stock may fluctuate substantially.
You
should consider an investment in our common stock to be risky, and you should invest in our common stock only if you can withstand
a significant loss and wide fluctuations in the market value of your investment. Some factors that may cause the market price
of our common stock to fluctuate, in addition to the other risks mentioned in this “Risk Factors” section and elsewhere
in this prospectus, are:
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sale
of our common stock by our stockholders, executives and directors;
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volatility
and limitations in trading volumes of our shares of common stock;
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our
ability to obtain financings to conduct and complete research and development activities including, but not limited to, our
clinical trials, and other business activities;
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possible
delays in the expected recognition of revenue due to lengthy and sometimes unpredictable sales timelines;
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the
timing and success of introductions of new products by us or our competitors or any other change in the competitive dynamics
of our industry, including consolidation among competitors, customers or strategic partners;
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network
outages or security breaches;
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our
ability to attract new customers;
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our
ability to secure resources and the necessary personnel to conduct clinical trials on our desired schedule;
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commencement,
enrollment or results of our clinical trials for our product candidate or any future clinical trials we may conduct;
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changes
in the development status of our product candidate;
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any
delays or adverse developments or perceived adverse developments with respect to the FDA’s review of our planned preclinical
and clinical trials;
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any
delay in our submission for studies or product approvals or adverse regulatory decisions, including failure to receive regulatory
approval for our product candidate;
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unanticipated
safety concerns related to the use of our product candidate;
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failures
to meet external expectations or management guidance;
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changes
in our capital structure or dividend policy, future issuances of securities, sales of large blocks of common stock by our
stockholders;
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our
cash position;
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announcements
and events surrounding financing efforts, including debt and equity securities;
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our
inability to enter into new markets or develop new products;
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reputational
issues;
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competition
from existing technologies and products or new technologies and products that may emerge;
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announcements
of acquisitions, partnerships, collaborations, joint ventures, new products, capital commitments, or other events by us or
our competitors;
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changes
in general economic, political and market conditions in or any of the regions in which we conduct our business;
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changes
in industry conditions or perceptions;
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changes
in valuations of similar companies or groups of companies;
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analyst
research reports, recommendation and changes in recommendations, price targets, and withdrawals of coverage;
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departures
and additions of key personnel;
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disputes
and litigations related to intellectual properties, proprietary rights, and contractual obligations;
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changes
in applicable laws, rules, regulations, or accounting practices and other dynamics; and
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other
events or factors, many of which may be out of our control.
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In
addition, if the market for stocks in our industry or industries related to our industry, or the stock market in general, experiences
a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial
condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us
to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.
We
have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
Our
management will have broad discretion in the application of the net proceeds from this offering, including for any of the currently
intended purposes described in the section entitled “Use of Proceeds.” Because of the number and variability of factors
that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently
intended use. Our management may not apply our cash from this offering in ways that ultimately increase the value of any investment
in our securities or enhance stockholder value. The failure by our management to apply these funds effectively could harm our
business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing
securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply our cash in ways
that enhance stockholder value, we may fail to achieve expected financial results, which may result in a decline in the price
of our shares of common stock, and, therefore, may negatively impact our ability to raise capital, invest in or expand our business,
acquire additional products or licenses, commercialize our product, or continue our operations.
Market
and economic conditions may negatively impact our business, financial condition and share price.
Concerns
over medical epidemics, energy costs, geopolitical issues, the U.S. mortgage market and a deteriorating real estate market, unstable
global credit markets and financial conditions, and volatile oil prices have led to periods of significant economic instability,
diminished liquidity and credit availability, declines in consumer confidence and discretionary spending, diminished expectations
for the global economy and expectations of slower global economic growth, increased unemployment rates, and increased credit defaults
in recent years. Our general business strategy may be adversely affected by any such economic downturns (including the downturn
related to the current COVID-19 pandemic), volatile business environments and continued unstable or unpredictable economic and
market conditions. If these conditions continue to deteriorate or do not improve, it may make any necessary debt or equity financing
more difficult to complete, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on
favorable terms could have a material adverse effect on our growth strategy, financial performance, and share price and could
require us to delay or abandon development or commercialization plans.
If
securities or industry analysts do not publish research or reports, or publish unfavorable research or reports about our business,
our stock price and trading volume may decline.
The
trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish
about us, our business, our markets and our competitors. We do not control these analysts. If securities analysts do not cover
our common stock, the lack of research coverage may adversely affect the market price of our common stock. Furthermore, if one
or more of the analysts who do cover us downgrade our stock or if those analysts issue other unfavorable commentary about us or
our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fails to regularly
publish reports on us, we could lose visibility in the market and interest in our stock could decrease, which in turn could cause
our stock price or trading volume to decline and may also impair our ability to expand our business with existing customers and
attract new customers.
Because
certain of our stockholders control a significant number of shares of our common stock, they may have effective control over actions
requiring stockholder approval.
Following
this offering, our directors, executive officers and principal stockholders, and their respective affiliates, will beneficially
own approximately 68.89% of our outstanding shares of common stock. As a result, these stockholders, acting together, would
have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors
and any merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders, acting together,
would have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership might
harm the market price of our common stock by:
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delaying,
deferring or preventing a change in corporate control;
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impeding
a merger, consolidation, takeover or other business combination involving us; or
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discouraging
a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.
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You
will incur immediate dilution as a result of this offering.
If
you purchase common stock in this offering, you will pay more for your shares than the net tangible book value of your shares.
After giving effect to our sale of 660,000 shares of our common stock in this offering at the public offering price
of $40.00 per share, and our net tangible book value as of September 30, 2020, if you purchase shares of common stock in
this offering, you will suffer immediate and substantial dilution of $37.75 per share with respect to the net tangible
book value of the common stock. See the section entitled “Dilution” elsewhere in this prospectus for a more detailed
discussion of the dilution you will incur if you purchase common stock in this offering. Accordingly, should we be liquidated
at our book value, you would not receive the full amount of your investment.
Future
sales and issuances of our common stock could result in additional dilution of the percentage ownership of our stockholders and
could cause our share price to fall.
We
expect that significant additional capital will be needed in the future to continue our planned operations, including increased
marketing, hiring new personnel, commercializing our product, and continuing activities as an operating public company. To the
extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may
sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we
determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction,
investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders,
and new investors could gain rights superior to our existing stockholders.
We
do not intend to pay cash dividends on our shares of common stock so any returns will be limited to the value of our shares.
We
currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not
anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited
to the increase, if any, of our share price.
We
are an “emerging growth company” and will be able to avail ourselves of reduced disclosure requirements applicable
to emerging growth companies, which could make our common stock less attractive to investors.
We
are an “emerging growth company,” as defined in the JOBS Act and we intend to take advantage of certain exemptions
from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”
including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act,
reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved. In addition, pursuant to Section 107 of the JOBS Act, as an “emerging growth company”
we intend to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying
with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain
accounting standards until those standards would otherwise apply to private companies. We cannot predict if investors will find
our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive
as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take
advantage of these reporting exemptions until we are no longer an “emerging growth company.” We will remain an “emerging
growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of
$1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our
initial public offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous
three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
We
may be at risk of securities class action litigation.
We
may be at risk of securities class action litigation. In the past, biotechnology and pharmaceutical companies have experienced
significant stock price volatility, particularly when associated with binary events such as clinical trials and product approvals.
If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources,
which could harm our business and results in a decline in the market price of our common stock.
We
are currently listed on The Nasdaq Capital Market. If we are unable to maintain listing of our securities on Nasdaq or any stock
exchange, our stock price could be adversely affected and the liquidity of our stock and our ability to obtain financing could
be impaired and it may be more difficult for our stockholders to sell their securities.
Although
our common stock is currently listed on The Nasdaq Capital Market, we may not be able to continue to meet the exchange’s
minimum listing requirements or those of any other national exchange. If we are unable to maintain listing on Nasdaq or if a liquid
market for our common stock does not develop or is sustained, our common stock may remain thinly traded.
The
listing rules of Nasdaq require listing issuers to comply with certain standards in order to remain listed on its exchange. If,
for any reason, we should fail to maintain compliance with these listing standards and Nasdaq should delist our securities from
trading on its exchange and we are unable to obtain listing on another national securities exchange, a reduction in some or all
of the following may occur, each of which could have a material adverse effect on our stockholders:
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the
liquidity of our common stock;
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the
market price of our common stock;
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our
ability to obtain financing for the continuation of our operations;
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the
number of institutional and general investors that will consider investing in our common stock;
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the
number of market makers in our common stock;
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●
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the
availability of information concerning the trading prices and volume of our common stock; and
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●
|
the
number of broker-dealers willing to execute trades in shares of our common stock.
|
Our
second amended and restated certificate of incorporation (“Amended and Restated Certificate of Incorporation”) and
our second amended and restated bylaws (the “Amended and Restated Bylaws”) and Delaware law may have anti-takeover
effects that could discourage, delay or prevent a change in control, which may cause our stock price to decline.
Our
Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws and Delaware law could make it more difficult
for a third party to acquire us, even if closing such a transaction would be beneficial to our stockholders. We are authorized
to issue up to 10 million shares of preferred stock. This preferred stock may be issued in one or more series, the terms of which
may be determined at the time of issuance by our board of directors without further action by stockholders. The terms of any series
of preferred stock may include voting rights (including the right to vote as a series on particular matters), preferences as to
dividend, liquidation, conversion and redemption rights and sinking fund provisions. The issuance of any preferred stock could
materially adversely affect the rights of the holders of our common stock, and therefore, reduce the value of our common stock.
In particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with,
or sell our assets to, a third party and thereby preserve control by the present management.
Provisions
of our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws and Delaware law also could have
the effect of discouraging potential acquisition proposals or making a tender offer or delaying or preventing a change in control,
including changes a stockholder might consider favorable. Such provisions may also prevent or frustrate attempts by our stockholders
to replace or remove our management. In particular, the certificate of incorporation and bylaws and Delaware law, as applicable,
among other things:
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provide
the board of directors with the ability to alter the Amended and Restated Bylaws without stockholder approval;
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place
limitations on the removal of directors;
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establish
advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted
upon at stockholder meetings; and
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provide
that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum.
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Financial
reporting obligations of being a public company in the U.S. are expensive and time-consuming, and our management is required to
devote substantial time to compliance matters.
As
a publicly traded company we incur significant additional legal, accounting and other expenses. The obligations of being a public
company in the U.S. require significant expenditures and place significant demands on our management and other personnel, including
costs resulting from public company reporting obligations under the Exchange Act and the rules and regulations regarding corporate
governance practices, including those under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection
Act, and the listing requirements of The Nasdaq Capital Market. These rules require the establishment and maintenance of effective
disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance
practices, among many other complex rules that are often difficult to implement, monitor and maintain compliance with. Moreover,
despite recent reforms made possible by the JOBS Act, the reporting requirements, rules, and regulations will make some activities
more time-consuming and costly, particularly after we are no longer an “emerging growth company.” Our management and
other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements and to
keep pace with new regulations, otherwise we may fall out of compliance and risk becoming subject to litigation or being delisted,
among other potential problems.
Our
Amended and Restated Bylaws provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum
for substantially all disputes between the Company and its stockholders, which could limit stockholders’ ability to obtain
a favorable judicial forum for disputes with the Company or its directors, officers or employees.
Our
Amended and Restated Bylaws provides that unless we consent in writing to the selection of an alternative forum, the State of
Delaware is the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of us, (ii) any action
asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of our Company to us or our stockholders,
(iii) any action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the Delaware
General Corporation Law (the “DGCL”) or our Amended and Restated Certificate of Incorporation or our Amended and Restated
Bylaws, or (iv) any action asserting a claim against us, our directors, officers, employees or agents governed by the internal
affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court of Chancery determines that
there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not
consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested in
the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have
subject matter jurisdiction. This exclusive forum provision would not apply to suits brought to enforce any liability or duty
created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal
jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations
thereunder.
Section
22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty
or liability created by the Securities Act or the rules and regulations thereunder. However, our Amended and Restated Bylaws contain
a federal forum provision which provides that unless we consent in writing to the selection of an alternative forum, the federal
district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause
of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in shares of our
capital stock are deemed to have notice of and consented to this provision.
These
choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable
for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors,
officers and other employees. Alternatively, if a court were to find our choice of forum provisions contained in either our Amended
and Restated Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving
such action in other jurisdictions, which could harm our business, results of operations, and financial condition.
If
we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately
report our financial condition, results of operations or cash flows.
The
Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure
controls and procedures. We are required to furnish a report by management on, among other things, the effectiveness of internal
control over financial reporting. This assessment will include disclosure of any material weaknesses identified by management
in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal
control over financial reporting that results in more than a reasonable possibility that a material misstatement of annual or
interim financial statements will not be prevented or detected on a timely basis. Section 404 of the Sarbanes-Oxley Act also generally
requires an attestation from an issuer’s independent registered public accounting firm on the effectiveness of its internal
control over financial reporting. However, for as long as we remain an emerging growth company under the JOBS Act, we may take
advantage of the exemption permitting us not to comply with the independent registered public accounting firm attestation requirement.
Our
compliance with Section 404 of the Sarbanes-Oxley Act may require that we incur substantial accounting expense and expend significant
management efforts. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During
the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting,
we may be unable to assert that our internal control over financial reporting is effective. In connection with management’s
assessment of internal controls over financial reporting for the quarter ended September 30, 2020, we identified a material weakness
due to inadequate segregation of duties within our accounting processes due to limited personnel and insufficient written policies
and procedures for accounting, IT and financial reporting and record keeping. Although we are developing a plan to remediate the
material weaknesses, we cannot assure you that we will be able to remediate such weaknesses or that there will not be new material
weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain
internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results
of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, we
could lose investor confidence in the accuracy and completeness of our financial reports, the value of our common stock could
decline, and we could be subject to sanctions or investigations by regulatory authorities. Failure to remedy any material weakness
in our internal control over financial reporting, or to implement or maintain other effective control systems required of public
companies, could also restrict our future access to the capital markets.
INFORMATION
REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements that involve risks and uncertainties. You should not place undue reliance on these
forward-looking statements. All statements other than statements of historical facts contained in this prospectus are forward-looking
statements. The forward-looking statements in this prospectus are only predictions. We have based these forward-looking statements
largely on our current expectations and projections about future events and financial trends that we believe may affect our business,
financial condition and results of operations. In some cases, you can identify these forward-looking statements by terms such
as “anticipate,” “believe,” “continue,” “could,” “depends,” “estimate,”
“expects,” “intend,” “may,” “ongoing,” “plan,” “potential,”
“predict,” “project,” “should,” “will,” “would” or the negative of
those terms or other similar expressions, although not all forward-looking statements contain those words. We have based these
forward-looking statements on our current expectations and projections about future events and trends that we believe may affect
our financial condition, results of operations, strategy, short- and long-term business operations and objectives, and financial
needs. These forward-looking statements include, but are not limited to, statements concerning the following:
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our
projected financial position and estimated cash burn rate;
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our
estimates regarding expenses, future revenues and capital requirements;
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our
ability to continue as a going concern;
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our
need to raise substantial additional capital to fund our operations;
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the
success, cost and timing of our clinical trials;
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our
dependence on third parties in the conduct of our clinical trials;
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●
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our
ability to obtain the necessary regulatory approvals to market and commercialize our product candidate;
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the
ultimate impact of the current coronavirus pandemic, or any other health epidemic, on our business, our clinical trials, our
research programs, healthcare systems or the global economy as a whole;
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●
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the
potential that results of preclinical and clinical trials indicate our current product candidate or any future product candidates
we may seek to develop are unsafe or ineffective;
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●
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the
results of market research conducted by us or others;
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our
ability to obtain and maintain intellectual property protection for our current product candidate;
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our
ability to protect our intellectual property rights and the potential for us to incur substantial costs from lawsuits to enforce
or protect our intellectual property rights;
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●
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the
possibility that a third party may claim we or our third-party licensors have infringed, misappropriated or otherwise violated
their intellectual property rights and that we may incur substantial costs and be required to devote substantial time defending
against claims against us;
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●
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our
reliance on third-party suppliers and manufacturers;
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●
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the
success of competing therapies and products that are or become available;
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●
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our
ability to expand our organization to accommodate potential growth and our ability to retain and attract key personnel;
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●
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the
potential for us to incur substantial costs resulting from product liability lawsuits against us and the potential for these
product liability lawsuits to cause us to limit our commercialization of our product candidate;
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market
acceptance of our product candidate, the size and growth of the potential markets for our current product candidate and any
future product candidates we may seek to develop, and our ability to serve those markets; and
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●
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the
successful development of our commercialization capabilities, including sales and marketing capabilities.
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These
forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk
Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time.
It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the
extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any
forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and
circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated
or implied in the forward-looking statements.
You
should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance
or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required
by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements.
We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus
to conform these statements to actual results or to changes in our expectations.
You
should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to
the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of
activity, performance and events and circumstances may be materially different from what we expect.
INDUSTRY
AND MARKET DATA
This
prospectus contains estimates and other statistical data made by independent parties and by us relating to market size and growth
and other data about our industry. We obtained the industry and market data in this prospectus from our own research as well as
from industry and general publications, surveys and studies conducted by third parties. This data involves a number of assumptions
and limitations and contains projections and estimates of the future performance of the industries in which we operate that are
subject to a high degree of uncertainty, including those discussed in “Risk Factors.” We caution you not to give undue
weight to such projections, assumptions and estimates. Further, industry and general publications, studies and surveys generally
state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness
of such information. While we believe that these publications, studies and surveys are reliable, we have not independently verified
the data contained in them. In addition, while we believe that the results and estimates from our internal research are reliable,
such results and estimates have not been verified by any independent source.
USE
OF PROCEEDS
We
estimate that the net proceeds from our issuance and sale of 660,000 shares of our common stock in this offering will be
approximately $23.9 million, based on a public offering price of $40.00 per share, after deducting
estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their
option to purchase additional shares in full, we estimate that the net proceeds from this offering will be approximately $27.5
million.
We
intend to use the net proceeds to fund our planned clinical trials, manufacturing and for general corporate purposes, including
working capital. We intend to use the first $16.0 million of net proceeds from this offering in the following order:
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Approximately
$12.0 million to enroll and treat patients in our Phase III clinical trial; and
|
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|
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●
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Approximately
$4.0 million for working capital and other general corporate purposes.
|
Any
additional capital that we raise pursuant to this offering will be used for the enrollment of additional patients in our Phase
III clinical trial, for the retention of CROs to conduct clinical trials, and for additional working capital and other general
corporate purposes, including reduction of liabilities to vendors, third parties, and related parties. We may also use a portion
of the net proceeds to in-license, acquire or invest in complementary businesses or products, however, we have no current commitments
or obligations to do so.
We
believe that it may cost approximately $12 million to $15 million to complete an interim analysis of the safety and efficacy
of our Phase III trial. If we are unable to raise sufficient funds for our Phase III trial as a result of this offering, we believe
that we may be able to raise additional funds pursuant to subsequent financings or from the proceeds of potential strategic transactions
from the out-licensing of marketing rights to GP2. We have flexibility based upon the amount of proceeds raised from this offering
as well as subsequent financings and other sources of capital with respect to the design of the Phase III clinical trial which
we believe that we may be able to alter by adjusting the enrollment rate, the number of patients, and/or the number of immunological
assays. We believe that we can also reduce costs associated with our Phase III trial by managing the clinical trial with internal
staff instead of using CROs and by further reducing management and staff compensation and overhead expenses, as necessary.
This
expected use of the net proceeds from this offering and our existing cash represents our intentions based upon our current plans,
financial condition and business conditions. Predicting the cost necessary to develop a product candidate can be difficult and
the amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress
of our development and commercialization efforts, the status of and results from clinical trials, any collaborations that we may
enter into with third parties for our product candidate and any unforeseen cash needs. As a result, our management will retain
broad discretion over the allocation of the net proceeds from this offering and our existing cash.
In
the ordinary course of our business, we expect to from time to time evaluate the acquisition of, investment in or in-license of
complementary products, technologies or businesses, and we could use a portion of the net proceeds from this offering for such
activities. We currently do not have any agreements, arrangements or commitments with respect to any potential acquisition, investment
or license.
Pending
our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments,
including short-term, investment-grade, interest-bearing instruments and government securities.
DIVIDEND
POLICY
We
have never paid or declared any cash dividends on our common stock, and we do not anticipate paying any cash dividends on our
common stock in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development
and expansion of our business. Any future determination to pay dividends will be at the discretion of our board of directors and
will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual
restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.
CAPITALIZATION
The
following table sets forth our cash and capitalization as of September 30, 2020:
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●
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on
an actual basis; and
|
|
|
|
|
●
|
on
an as adjusted basis to give further effect to our issuance and sale of 660,000 shares of our common stock in this
offering at the public offering price of $40.00 per share, after deducting the estimated underwriting discounts and commissions
and our estimated offering expenses.
|
(in
thousands, except share and per share data)
|
|
Actual
(unaudited)
|
|
|
As
Adjusted
(unaudited)
|
|
Cash
|
|
$
|
6,214
|
|
|
$
|
30,104
|
|
|
|
|
|
|
|
|
|
|
Advances
from related party/shareholder
|
|
|
635
|
|
|
|
635
|
|
Stockholders’
deficit:
|
|
|
|
|
|
|
|
|
Preferred
stock, par value $0.001 per share; 10,000,000 shares authorized, no shares issued and outstanding
|
|
|
–
|
|
|
|
–
|
|
Common
stock, par value $0.001 per share; 100,000,000 shares authorized, 11,995,185 shares issued and outstanding, actual; 100,000,000
shares authorized, 12,655,185 shares issued and outstanding, as adjusted
|
|
|
12
|
|
|
|
13
|
|
Additional
paid-in capital
|
|
|
32,572
|
|
|
|
58,971
|
|
Accumulated
deficit
|
|
|
(27,926
|
)
|
|
|
(30,436
|
)
|
Total
stockholders’ equity
|
|
|
4,658
|
|
|
|
28,548
|
|
Total
capitalization
|
|
$
|
4,658
|
|
|
$
|
28,548
|
|
The
number of shares of our common stock to be outstanding after this offering is based on 11,995,185 shares of our common stock outstanding
as of September 30, 2020, assumes no exercise by the underwriters of their over-allotment option and excludes:
|
●
|
602,173
shares of common stock subject to future vesting issued to members of management and directors;
|
|
|
|
|
●
|
1,498,128
shares of common stock reserved for future issuance under our 2019 Equity Incentive Plan; and
|
|
|
|
|
●
|
100,869
shares of common stock issuable upon exercise of warrants at a weighted average exercise price of $7.1875.
|
DILUTION
If
you invest in our common stock, your ownership interest will be diluted to the extent of the difference between the public offering
price per share of our common stock and the as adjusted net tangible book value per share of our common stock immediately after
this offering.
As
of September 30, 2020 we had a historical net tangible book value of $4,640,955, or $0.39 per share of common stock, based on
11,995,185 shares of common stock outstanding at September 30, 2020. Our historical net tangible book value per share is the amount
of our total tangible assets less our total liabilities at September 30, 2020, divided by the number of shares of common stock
outstanding at September 30, 2020.
After
giving further effect to the sale of 660,000 shares of common stock in this offering at the public offering price
of $40.00 per share, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses
payable by us, our as adjusted net tangible book value at September 30, 2020 would have been $28.5 million, or $2.25
per share of common stock. This represents an immediate increase in as adjusted net tangible book value of $1.86 per
share to existing stockholders and immediate dilution of $37.75 per share to new investors purchasing shares of common
stock in this offering.
The
following table illustrates this dilution on a per share basis:
Public
offering price per share
|
|
|
|
|
|
$
|
40.00
|
|
Net
tangible book value per share as of September 30, 2020
|
|
$
|
0.39
|
|
|
|
|
|
Increase
in as adjusted net tangible book value per share attributable to new investors in this offering
|
|
|
1.86
|
|
|
|
|
|
As
adjusted net tangible book value per share immediately after this offering
|
|
|
|
|
|
|
2.25
|
|
Dilution
per share to new investors in this offering
|
|
|
|
|
|
$
|
37.75
|
|
If
the underwriters exercise their option to purchase 99,000 additional shares in full, the as adjusted net tangible book
value per share after giving effect to the offering would be $2.52 per share. This represents an increase in as adjusted
net tangible book value of $2.13 per share to existing stockholders and dilution in as adjusted net tangible book value
of $37.48 per share to new investors.
The
number of shares of our common stock to be outstanding after this offering is based on 11,995,185 shares of our common stock outstanding
as of September 30, 2020, assumes no exercise by the underwriters of their over-allotment option and excludes:
|
●
|
602,173
shares of common stock subject to future vesting issued to members of management and directors;
|
|
|
|
|
●
|
1,498,128
shares of common stock reserved for future issuance under our 2019 Equity Incentive Plan; and
|
|
|
|
|
●
|
100,869
shares of common stock issuable upon exercise of warrants at a weighted average exercise price of $7.1875.
|
To
the extent that stock options or warrants are exercised, we issue new stock options under our equity incentive plan, or we issue
additional common stock in the future, there will be further dilution to investors participating in this offering. In addition,
if we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could
result in further dilution to our stockholders.
SELECTED
FINANCIAL DATA
The
following table sets forth our selected financial data as of the dates and for the periods indicated. We have derived the statement
of operations data for the years ended December 31, 2019 and 2018 from our audited financial statements included elsewhere in
this prospectus. The statements of operations data for the nine months ended September 30, 2020 and 2019 and the balance sheet
data as of September 30, 2020 have been derived from our unaudited financial statements included elsewhere in this prospectus.
The following summary financial data should be read with “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and our financial statements and related notes and other information included elsewhere in this
prospectus. Our historical results are not necessarily indicative of the results to be expected in the future.
Statement
of Operations Data:
(in
thousands, except share and per share data)
|
|
Years
Ended
December 31,
|
|
|
Nine
Months Ended
September 30,
(unaudited)
|
|
|
|
2019
|
|
|
2018
|
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating
costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
2,606
|
|
|
|
1,270
|
|
|
|
459
|
|
|
|
2,348
|
|
General
and administrative
|
|
|
819
|
|
|
|
420
|
|
|
|
253
|
|
|
|
741
|
|
Total
operating expenses
|
|
|
3,425
|
|
|
|
1,690
|
|
|
|
712
|
|
|
|
3,089
|
|
Net
loss
|
|
$
|
(3,425
|
)
|
|
$
|
(1,690
|
)
|
|
$
|
(712
|
)
|
|
$
|
(3,089
|
)
|
Net
loss per common share – basic and diluted(1)
|
|
$
|
(1.52
|
)
|
|
$
|
(8.32
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(13.26
|
)
|
Weighted
average common shares outstanding – basic and diluted(1)
|
|
|
2,257,979
|
|
|
|
202,996
|
|
|
|
8,628,958
|
|
|
|
232,916
|
|
(1)
|
See
Note 3 to our financial statements for an explanation of the method used to compute basic and diluted net loss per share.
|
Balance
Sheet Data:
(in
thousands)
|
|
December
31,
|
|
|
September
30,
2020
|
|
|
|
2019
|
|
|
2018
|
|
|
(unaudited)
|
|
Cash
|
|
$
|
7
|
|
|
$
|
85
|
|
|
$
|
6,214
|
|
Working
capital (deficit)
|
|
|
(1,370
|
)
|
|
|
(643
|
)
|
|
|
4,641
|
|
Total
assets
|
|
|
27
|
|
|
|
109
|
|
|
|
6,274
|
|
Total
liabilities
|
|
|
1,377
|
|
|
|
10,229
|
|
|
|
1,616
|
|
Accumulated
deficit
|
|
|
(27,214
|
)
|
|
|
(23,789
|
)
|
|
|
(27,926
|
)
|
Total
stockholders’ equity (deficit)
|
|
|
(1,350
|
)
|
|
|
(10,120
|
)
|
|
|
4,658
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
27
|
|
|
$
|
109
|
|
|
$
|
6,274
|
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You
should read the following discussion and analysis of our financial condition and plan of operations together with “Selected
Financial Data” and our financial statements and the related notes appearing elsewhere in this prospectus. In addition to
historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and
assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such
differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors”
included elsewhere in this prospectus. All amounts in this report are in U.S. dollars, unless otherwise noted.
Overview
We
are a biopharmaceutical company that is developing GP2, an immunotherapy designed to prevent the recurrence of breast cancer following
surgery. GP2 is a 9 amino acid transmembrane peptide of the HER2/neu protein, a cell surface receptor protein that is expressed
in a variety of common cancers, including expression in 75% of breast cancers at low (1+), intermediate (2+), and high (3+ or
over-expressor) levels. In a completed Phase IIb clinical trial led by MD Anderson Cancer Center, no recurrences were observed
in the HER2/neu 3+ adjuvant setting after median 5 years of follow-up, if the patient received the 6 primary intradermal
injections over the first 6 months. We are planning to commence a Phase III clinical trial in 2021.
To
date, we have not generated any revenue and we have incurred net losses. Our net losses were approximately $3.4 million and $1.7
million for the years ended December 31, 2019 and 2018, respectively, approximately $0.3 million and $0.3 million for the three
months ended September 30, 2020 and 2019, respectively, and approximately $0.7 million and $3.1 million for the nine months ended
September 30, 2020 and 2019, respectively.
Our
net losses have resulted from costs incurred in developing the drug in our pipeline, planning and preparing for clinical trials
and general and administrative activities associated with our operations. We expect to continue to incur significant expenses
and corresponding increased operating losses for the foreseeable future as we continue to develop our pipeline. Our costs may
further increase as we conduct clinical trials and seek regulatory approval for and prepare to commercialize our product candidate.
We expect to incur significant expenses to continue to build the infrastructure necessary to support our expanded operations,
clinical trials, commercialization, including manufacturing, marketing, sales and distribution functions. We will also experience
increased costs associated with operating as a public company.
Basis
of Presentation
The
accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States
of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
Results
of Operations For the Years Ended December 31, 2019 and 2018
Research
and Development Expenses
Research
and development expenses increased by $1,336,404, or 105%, to $2,606,420 for the year ended December 31, 2019 from $1,270,016
for the year ended December 31, 2018. The increase was primarily the result of an increase in compensation expenses, license expenses,
and the GMP manufacturing of GP2.
General
and Administrative Expenses
General
and administrative expenses increased by $399,248, or 95% to $818,887 for the year ended December 31, 2019 from $419,639 for the
year ended December 31, 2018. The increase was primarily the result of an increase in compensation expenses and advisory and audit
expenses.
Results
of Operations For the Three Months Ended September 30, 2020 and 2019
Research
and Development Expenses
Research
and development expenses decreased by $126,473, or 44%, to $158,031 for the three months ended September 30, 2020 from $284,504
for the three months ended September 30, 2019. The decrease was primarily the result of a decrease in accrued manufacturing expenses.
General
and Administrative Expenses
General
and administrative expenses increased by $47,325, or 92% to $98,834 for the three months ended September 30, 2020 from $51,509
for the three months ended September 30, 2019. The increase was primarily the result of an increase in stock compensation.
Results
of Operations For the Nine Months Ended September 30, 2020 and 2019
Research
and Development Expenses
Research
and development expenses decreased by $1,889,020, or 80%, to $458,726 for the nine months ended September 30, 2020 from $2,347,746
for the nine months ended September 30, 2019. The decrease was primarily the result of a decrease in related party payables.
General
and Administrative Expenses
General
and administrative expenses decreased by $487,815, or 66%, to $253,210 for the nine months ended September 30, 2020 from $741,025
for the nine months ended September 30, 2019. The decrease was primarily the result of a decrease in related party payables and
an increase in stock-based compensation.
Liquidity
and Capital Resources
Since
our inception in 2006, we have devoted most of our cash resources to research and development and general and administrative activities.
We have not yet achieved commercialization of our product and have a cumulative net loss from our operations. We will continue
to incur net losses for the foreseeable future. Our financial statements have been prepared assuming that we will continue as
a going concern. As of September 30, 2020, our principal source of liquidity was our cash, which totaled $6,214,337, and additional
loans and accrued unreimbursed expenses from related parties. Following the capital raise during our third quarter of 2020, which
contributed to the improvement in our cash and working capital positions as of September 30, 2020, we believe that the substantial
doubt about our ability to continue as a going concern has been alleviated, and that we have sufficient liquidity to continue
as a going concern through the next twelve months.
We
will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through the
sale of equity and/or debt securities; however, there is no assurance that we will be successful at raising additional capital
in the future. If our plans are not achieved and/or if significant unanticipated events occur, we may have to further modify our
business plan, which may require us to raise additional capital. As of September 30, 2020 and December 31, 2019, our principal
source of liquidity was our cash, which totaled $6,214,337 and $6,835, respectively, and additional loans and accrued unreimbursed
expenses from related parties. Historically, our principal sources of cash have included proceeds from the sale of common stock
and preferred stock and related party loans. Our principal uses of cash have included cash used in operations. We expect that
the principal uses of cash in the future will be for continuing operations, funding of research and development, including our
clinical trials, and general working capital requirements.
Cash
Flow Activities for the Years Ended December 31, 2019 and 2018
We
incurred net losses of $3,425,307 and $1,689,655 during the years ended December 31, 2019 and 2018, respectively, and the increase
was primarily due to an increase in compensation expense, advisory and audit expenses, license expenses, and the GMP manufacturing
of GP2. Cash was $85,102 at December 31, 2018 and $6,835 at December 31, 2019 and decreased due to the following reasons:
Operating
Activities
Net
cash used in operating activities was $293,267 for the year ended December 31, 2019 and $114,952 for the year ended December 31,
2018. The increase was primarily due to an increase in advisory and audit expenses and the GMP manufacturing of GP2.
Investing
Activities
We
did not use or generate cash from investing activities during the year ended December 31, 2019 and December 31, 2018.
Financing
Activities
Net
cash provided by financing activities was $215,000 during the year ended December 31, 2019, attributable to related party loans.
Net cash provided by financing activities was $200,000 during the year ended December 31, 2018, attributable to the issuance of
preferred stock and related party loans as part of a transfer process between brokerage firms.
Cash
Flow Activities for the Nine Months Ended September 30, 2020 and 2019
We
incurred net losses of $711,936 and $3,088,771 during the nine months ended September 30, 2020 and 2019, respectively. The decrease
was primarily the result of a decrease in related party payables and accounts payable and an increase in stock-based compensation.
Operating
Activities
Net
cash used in operating activities was $0 for the nine months ended September 30, 2020 and $79,100 for the nine months ended September
30, 2019.
Investing
Activities
We
did not use or generate cash from investing activities during the nine months ended September 30, 2020 and September 30, 2019.
Financing
Activities
We
generated $6,207,502 from financing activities during the nine months ended September 30, 2020 as net proceeds from our initial
public offering of common stock and did not use or generate cash from financing activities during the nine months ended September
30, 2019.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or special purpose entities.
Critical
Accounting Policies
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the amounts reported in its financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates
and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management
believes to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty
and, as such, actual results may differ from management’s estimates.
Cash
Cash
consists primarily of deposits with commercial banks and financial institutions.
Impairment
of Long-Lived Assets
We
review long-lived assets for impairment when events or changes in circumstances indicate the carrying value of the assets may
not be recoverable. Recoverability is measured by comparison of the book values of the assets to future net undiscounted cash
flows that the assets or the asset groups are expected to generate. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the book value of the assets exceed their fair value, which is measured based
on the estimated discounted future net cash flows arising from the assets or asset groups.
Stock-Based
Compensation
Compensation
expense related to warrants and stock granted to employees and non-employees is measured at the grant date based on the estimated
fair value of the award and is recognized on a straight-line basis over the requisite service period. Forfeitures are recognized
as a reduction of stock-based compensation expense as they occur. Stock-based compensation expense for an award with a performance
condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such
performance condition is not determined to be probable or is not met, no compensation expense is recognized and any previously
recognized compensation expense is reversed.
Research
and Development Costs
Research
and development expenses are charged to operations as incurred. Research and development expenses include, among other things,
salaries, costs of outside collaborators and outside services, and supplies.
Income
Taxes
Our
income tax returns are based on calculations and assumptions that are subject to examination by the Internal Revenue Service and
other tax authorities. In addition, the calculation of tax liabilities involves dealing with uncertainties in the application
of complex tax regulations.
Basic
and Diluted Loss per Share
We
compute loss per share in accordance with Accounting Standards Codification (“ASC”) 260 — Earnings per Share
(“ASC 260”). ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the
face of the statements of operations. Basic EPS is computed by dividing net loss available to common shareholders (numerator)
by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period using the treasury stock method and convertible notes payable using the
if-converted method. Diluted EPS excludes all dilutive potential shares if their effect is antidilutive. During periods of net
loss, all common stock equivalents are excluded from the diluted EPS calculation because they are antidilutive.
Recent
Accounting Pronouncements
We
have evaluated the following recent accounting pronouncements through the date the financial statements were issued and filed
with the SEC and believe that none of them will have a material effect on our financial statements:
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2016-02, “Leases: Topic 842” (“ASU 2016-02”), to supersede nearly all existing lease guidance under
GAAP. The guidance would require lessees to recognize most leases on their balance sheets as lease liabilities with corresponding
right-of-use assets. ASU 2016-02 is effective for the Company in the first quarter of its fiscal year ending December 31, 2019
using a modified retrospective approach with the option to elect certain practical expedients. The Company has no leases, thus
the adoption of ASU 2016-02 will have no material impact on the Company’s financial statements.
In
May 2016, the FASB issued ASU 2016-12, Revenue from Contracts from Customers (Topic 606): Narrow-Scope Improvements and Practical
Expedients. The amendments in this update affect the guidance in ASU 2014-09. The core principle of the guidance in Topic 606
is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments
in ASU 2016-12 do not change the core principle of the guidance in Topic 606, but instead affect only the narrow aspects noted
in Topic 606. Topic 606 became effective for the Company on December 1, 2018. The Company has no revenue, thus the adoption of
ASU 2016-12 will have no material impact on the Company’s financial statements.
In
May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting. The amendments
in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity
to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods,
and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption
in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been
issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance.
The Company has elected early adoption of ASU 2017-09 to conform the accounting for share-based compensation to employees and
nonemployees.
In
July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480),
Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked
financial instruments (or embedded features) with down round features. When determining whether certain financial instruments
should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when
assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements
for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option)
no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature.
For freestanding equity classified financial instruments, the amendments require entities that present EPS in accordance with
Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as
a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options
that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic
470-20, Debt — Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in
Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending
content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities,
the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning
after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted
for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any
adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company evaluated
ASU 2017-11 and determined that the adoption of this new accounting standard did not have a material impact on the Company’s
financial statements.
In
June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting,” which modifies the accounting for share-based payment awards issued to nonemployees to largely align
it with the accounting for share-based payment awards issued to employees. ASU 2018-07 is effective for us for annual periods
beginning January 1, 2019. The Company evaluated ASU 2018-07 and determined that the adoption of this new accounting standard
did not have a material impact on the Company’s financial statements.
JOBS
Act
On
April 5, 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can
take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (“Securities
Act”) for complying with new or revised accounting standards. In other words, an “emerging growth company” can
delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We
have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for
complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under
the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company
effective dates for complying with new or revised accounting standards.
Subject
to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of
these exemptions, including, without limitation, (i) providing an auditor’s attestation report on our system of internal
controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement
that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation
or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known
as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (i) the
last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal
year following the fifth anniversary of the date of the completion of our initial public offering; (iii) the date on which we
have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed
to be a large accelerated filer under the rules of the SEC.
BUSINESS
Overview
We
are a biopharmaceutical company that is developing GP2, an immunotherapy designed to prevent the recurrence of breast cancer following
surgery. GP2 is a 9 amino acid transmembrane peptide of the HER2/neu protein, a cell surface receptor protein that is expressed
in a variety of common cancers, including expression in 75% of breast cancers at low (1+), intermediate (2+), and high (3+ or
over-expressor) levels. In a completed Phase IIb clinical trial led by MD Anderson Cancer Center, no recurrences were observed
in the HER2/neu 3+ adjuvant setting after median 5 years of follow-up, if the patient received the 6 primary intradermal
injections over the first 6 months. We are planning to commence a Phase III clinical trial in 2021.
Our
Product Candidate
GP2
is a HER2/neu transmembrane peptide that elicits a targeted immune response against HER2/neu-expressing cancers.
Below is an image of a cell surface showing therapeutically relevant cell surface proteins in cancer. Breast cancers and other
solid tumors with elevated expression of HER2/neu protein are highly aggressive with an increased disease recurrence and
a worse prognosis.
GM-CSF
Immunoadjuvant
Recombinant
human granulocyte macrophage colony-stimulating factor or GM-CSF (sargramostim, Leukine®) has been shown to enhance monocyte
as well as neutrophil cytotoxicity against melanoma tumor cells and to enhance activity-dependent cellular cytotoxicity of monocytes
and neutrophils against targets coated with the anti-ganglioside antibodies. GP2 will be delivered in combination with GM-CSF
to induce GP2 peptide specific immunity. GP2 treatment is administered via an intradermal injection by mixing GP2 peptide and
GM-CSF at the time of administration.
GM-CSF
is available in both liquid and lyophilized forms exclusively from one manufacturer, and we will continue to be dependent on such
manufacturer for our supply of GM-CSF in combination with GP2 in our ongoing GP2 trials and upon potential commercialization of
GP2. Although GM-CSF is currently approved for sale in the U.S. by the FDA and is available in other countries on a name patient
basis through a specialized company that focuses on making products approved in the U.S. available globally, GM-CSF may be registered
for sale in other countries by such manufacturer in the future.
Cancer
Immunotherapy
Cancer
immunotherapies seek to stimulate an individual’s own immune system to selectively attack cancer cells while not affecting
normal cells or delivering certain immune system components in order to inhibit the spread of cancer. Cancer immunotherapy drugs
are a new method of cancer treatment which are in addition to more established treatment options such as surgery, chemotherapy,
targeted therapy, and radiation therapy. Therefore, cancer immunotherapy is an important and rapidly emerging field, which has
led to new clinical research studies and garnered the attention of biotechnology and pharmaceutical companies, regulatory agencies,
payors and hospital systems, cancer patients and their families, and the general public at large.
Cancer
immunotherapy harnesses the body’s natural immune system response to fight and/or prevent tumor growth. An essential characteristic
of the immune system, which is a network of tissues, cells, and signaling molecules that work to protect the body, is its ability
to differentiate foreign threats, including cancerous growths, from normal cells. Despite the fact that tumor cells originate
from normal cells, tumor cells can be recognized as foreign threats because of their ability to elicit the production of tumor
antigens. These antigens may be released in the interstitial tissues, and eventually in the bloodstream or may remain on the surface
of cognate cancer cells. The HER2/neu protein is one of the most widely expressed tumor antigens in multiple malignances.
Several
cell types play an important role in the development and maintenance of immune responses against cancer. The most important cell
types with regard to immune response are antigen-presenting cells (“APCs”) and lymphocytes. APCs include various subtypes,
such as dendritic cells, monocytes and macrophages. Once a patient is exposed to a tumor antigen (either by the presence of cancer
itself or through active immunization through a vaccine type immunotherapeutic), the tumor antigen gets recognized by the APC
and becomes “processed” through digestion into smaller fragments within the APC. Subsequently, the APC “communicates”
with a specific type of lymphocyte called a T-cell. Inactive T-cells search for tumor antigens by transiently binding to antigens
presented by major histocompatibility complexes (“MHCs”) on the APCs. There is great variability in the expression
of different subtypes of MHCs in the human population. The MHC system expresses human leukocyte antigens (“HLAs”)
and these HLA subtypes determine the vigor and duration of any given T-cell response to a cancer among different patients.
As
shown below, following GP2 immunotherapy, CD8+ cytotoxic T lymphocytes recognize and destroy HER2/neu-expressing cancer
cells. GP2 is administered in combination with an FDA-approved immunoadjuvant GM-CSF, which stimulates the proliferation of antigen
presenting cells. Preclinical studies have shown that T cells sensitized against the GP2 peptide demonstrate significant recognition
of HER2/neu-expressing tumors. Both ovarian and breast cancer-specific CTLs recognize GP2, which is widely expressed in
HER2/neu-expressing tumors and is capable of inducing tumor-specific CTL populations in vitro.
Breast
Cancer Treatment Approach — Adjuvant & Neoadjuvant Treatments
As
shown below, in the adjuvant setting, a HER2/neu 3+ patient typically receives Herceptin in the first year following breast
cancer surgery, with the hope that their breast cancer will not recur, and with the odds of recurrence slowly decreasing over
the first 5 years following surgery. Herceptin has been shown to reduce recurrence rates by approximately 50%, from 25% to 12%,
in the adjuvant setting. In the neoadjuvant setting, a HER2/neu 3+ patient receives treatment before surgery and based
on the results of a biopsy at surgery, will receive Herceptin or Kadcyla, a more potent form of Herceptin, following surgery.
Kadcyla has been shown to reduce recurrence rates by 50%, from 22% to 11%, in the neoadjuvant setting. Accordingly, we believe
that GP2 may be effective in safely addressing the 50% of recurring patients who do not respond to either Herceptin or Kadcyla.
GP2
is administered in combination with the immunoadjuvant GM-CSF in years 2-4, following the first year of treatment with Herceptin,
in a series of 11 intradermal injections comprising 6 primary injections over 6 months (1 injection per month) followed by 5 booster
injections every 6 months thereafter. Furthermore, we believe that recently approved drugs such as Perjeta and Nerlynx do not
fully address this unmet need, even in their most efficacious subpopulations, and that in the initial GP2 indication, approximately
17,000 new patients may be eligible for GP2 treatment per year, which could save approximately 1,500 to 2,000 lives per year.
As
only injection site reactions were observed (which speaks to the immunogenicity of GP2) and no SAEs were reported in the GP2 Phase
IIb clinical trial, GP2 may be positioned as the final treatment for patients post-surgery. Furthermore, we believe that clinicians
and patients are seeking a de-escalation and a return to normal life free of toxic treatments, especially if the chance of recurrence
is reduced substantially. Lastly, we believe that GP2 may be the treatment that will synergistically overlap with or follow Herceptin,
Kadcyla, or Enhertu (fam-trastuzumab deruxtecan-nxki, DS-8201) or any of the other Herceptin derivatives or antibody drug conjugates
being developed.
We
believe that U.S. academic centers will be moving higher risk, node positive patients into neoadjuvant treatment and will use
Kadcyla if residual disease is observed at the time of surgery; however community centers and international markets may not move
as quickly or at all, due to the high dual therapy costs and the lack of approval or reimbursement of Kadcyla in markets outside
of the U.S. and Europe. GP2 will be pursued in both the adjuvant and neoadjuvant settings in HER2/neu 3+ patients in our
planned Phase III trial.
GP2
Clinical Data & Planned Phase III Trial
In
the Phase IIb and three Phase I clinical trials where 138 patients received GP2 immunotherapy, there were no SAEs reported in
any of the trials, including for GP2 and GM-CSF combination treatments or any other GP2 combination treatments.
Clinical
Trial Description
|
|
Status
|
GP2
Phase IIb Clinical Trial
|
|
Trial
Completed
|
●
|
Prospective,
Randomized, Single-Blinded, Multi-Center Phase II Trial of the HER2/neu Peptide GP2 + GM-CSF Vaccine versus GM-CSF
Alone in HLA-A02+ Node-Positive and High-Risk Node-Negative Breast Cancer Patients to Prevent Recurrence
|
|
|
|
|
|
|
●
|
89
patients treated with GP2 + GM-CSF, 91 placebo patients treated with GM-CSF
|
|
|
|
|
|
|
GP2
Phase I Clinical Trial — Combination with AE37
|
|
Trial
Completed
|
●
|
Phase
I Safety Trial of the GP2 + GM-CSF Vaccine in Combination with the Helper Peptide AE37 + GM-CSF Vaccine
|
|
|
|
|
|
|
●
|
14
patients treated with GP2 + AE37 + GM-CSF
|
|
|
|
|
|
|
GP2
Phase I Clinical Trial — Combination with Trastuzumab
|
|
Trial
Completed
|
●
|
Phase
Ib Trial of Combination Immunotherapy with HER2/neu Peptide GP2 + GM-CSF Vaccine and Trastuzumab in Breast Cancer Patients
|
|
|
|
|
|
|
●
|
17
patients treated with GP2 + GM-CSF + trastuzumab
|
|
|
|
|
|
|
First
GP2 Phase I Clinical Trial
|
|
Trial
Completed
|
●
|
Phase
Ib Trial of HER2/neu Peptide (GP2) Vaccine in Breast Cancer Patients
|
|
|
|
|
|
|
●
|
18
patients treated with GP2 + GM-CSF
|
|
|
Phase
I Clinical Trials
First
GP2 Phase I Clinical Trial
As
shown in the table above, the first GP2 Phase I clinical trial was conducted at Walter Reed Army Medical Center. The study was
conducted in patients over the age of 18 years with a diagnosis of HER2/neu 1-3+, node negative breast cancer who had undergone
primary surgical and medical therapies and who were without evidence of disease at the time of enrollment into the study. Patients
were HLA typed and HLA-A02 patients were skin tested for recall antigens. HLA-A02 patients found to be immunologically intact
received the vaccine. There were no grade 3-5 toxicities among the 18 patients receiving a total of 108 doses of GP2 + GM-CSF.
Among all patients, the maximum local toxicity occurring during the entire series was grade 1 in 38.9% and grade 2 in 61.1% of
the patients. The maximum systemic toxicity during the series was grade 0 in 5.6%, grade 1 in 61.1%, and grade 2 in 33.3% of the
patients. The most common local reactions included erythema and induration (100% of patients), pruritis (25%), and inflammation
(23%). The most common systemic reactions were grade 1 fatigue (40%) and grade 1 arthralgia/myalgia (15%). There were no recurrences
and no deaths reported in study subjects. Additional data analysis included topics such as pre-existing immunity, dosing, and
epitope spreading.
GP2
Phase I Clinical Trial — Combination with Trastuzumab
Preclinical
research has previously demonstrated that a synergy may exist between trastuzumab and GP2 peptide-stimulated CTLs ex vivo. Pretreatment
of breast cancer cells with trastuzumab followed by incubation with GP2 peptide-induced CTLs resulted in enhanced cytotoxicity
in 3 tumor cell lines compared to treatment with trastuzumab or GP2-specific CTLs alone. These results suggest that concurrent
GP2 vaccination during trastuzumab therapy may be a possible combination immunotherapy.
As
shown in the table above, a Phase I trial evaluating the combination therapy of GP2 + GM-CSF administered simultaneously with
trastuzumab was conducted. The combination therapy was found to be well tolerated when given concurrently in 17 clinically disease-free,
HER2/neu over-expressing breast cancer patients.
GP2
Phase I Clinical Trial — Combination with AE37
As
shown in the table above, a Phase I trial evaluating the combination therapy of GP2 + GM-CSF administered simultaneously with
HER2/neu peptide AE37 in 14 clinically disease-free, HER2/neu breast cancer and ovarian cancer patients was conducted.
While 28 patients enrolled, 14 patients completed the 6 vaccination series. Initial results suggest that combining GP2 and AE37
peptides is well tolerated at all tested dosing levels. Additionally, we believe the combination is capable of stimulating strong
peptide-specific in vivo immune responses.
During
the primary vaccination series, an AE37/GP2+GM-CSF dual peptide vaccine resulted in robust T-cell proliferation. However, significant
immune responses became more variable at 6 and 12 months post vaccination suggesting the need for boosters in some individuals.
Phase
II Clinical Trial
GP2
Phase IIb Clinical Trial Overview
In
a prospective, randomized, single-blinded, placebo-controlled, multi-center (16 sites led by MD Anderson Cancer Center) Phase
IIb clinical trial of HLA-A02 breast cancer patients, the combination of GP2-GMCSF-Herceptin treatment resulted in no recurrences
in 46 HER2/neu 3+ over-expressor patients who were fully treated with GP2 versus 50 placebo patients who were treated with
GMCSF-Herceptin and who recurred at a rate similar to historical recurrence rates for patients treated with Herceptin. After median
5 years of follow-up, there were 0% cancer recurrences in the HER2/neu 3+ patients treated with GP2-GMCSF-Herceptin, if
the patient received the 6 primary intradermal injections over the first 6 months, versus an 11% cancer recurrence rate in the
placebo arm treated with GMCSF-Herceptin (p = 0.0338). Thus, sequentially combining Herceptin in year 1 and GP2-GMCSF in
years 2-4 may dramatically lower breast cancer recurrences in this patient population.
The
design of the Phase IIb trial was as follows:
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Prospective,
randomized, single-blinded, placebo-controlled phase IIb clinical trial of GP2 + GM-CSF or GM-CSF alone in HER2/neu
1-3+, HLA-A02 patients.
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High-risk
breast cancer patients (Node Positive, High Risk Node Negative) who were disease-free and immunocompetent after having completed
standard of care therapy.
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The
primary endpoint was to determine if GP2 + GM-CSF reduces breast cancer recurrence rates versus GM-CSF alone. A recurrence
is defined as either a pathologically confirmed recurrence or a new radiographic finding during standard of care follow-up.
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The
Phase IIb clinical trial closed in December 2018. The final median 5 year follow-up data from this Phase IIb clinical trial is
currently being collected and analyzed.
GP2
+ GM-CSF Treated
Patients Recurrence Rate
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GM-CSF
Placebo
Patients Recurrence Rate
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Hazard
Ratio
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Kaplan-Meier
Survival Analysis
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0.0%
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11.0%
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0.00
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p
= 0.0338
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Of
the total 180 intent-to-treat patients enrolled, 168 patients completed the 6 primary intradermal injection series over the first
6 months. HER2/neu status was determined based on the expression levels of the HER2/neu protein in each patient
using standard of care HER2/neu diagnostic technology. The trial was prospectively designed to analyze these fully treated
patients by 2 distinct patient populations, namely HER2/neu 3+ (over expressors) and HER2/neu 1-2+ (low to intermediate
expressors):
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HER2/neu
3+ Over Expressors: In the 96 HER2/neu 3+, HLA-A02 patients, no recurrences were observed if the patient received
the 6 primary intradermal injections over the first 6 months following the first year of Herceptin treatment. This is the
target population for our planned Phase III trial.
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HER2/neu
1-2+ Low to Intermediate Expressors: In the 72 HER2/neu 1-2+, HLA-A02 patients, no reduction in recurrence rates
were observed, but Herceptin was not administered to these patients. Thus, we may pursue a future trial with GP2 in combination
with Herceptin therapy.
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San
Antonio Breast Cancer Symposium Poster Presentation of Median 5 Year Top-Line Data
The
median 5 year top-line data described below was presented at the San Antonio Breast Cancer Symposium in a poster on December
9, 2020, entitled “Five year median follow-up data from a prospective, randomized, placebo-controlled, single-blinded,
multicenter, phase IIb study evaluating the reduction of recurrences using HER2/neu peptide GP2 + GM-CSF vs. GM-CSF alone after
adjuvant trastuzumab in HER2 positive women with operable breast cancer.”
The
final analysis of the GP2 prospective, randomized, placebo-controlled, single-blinded, multicenter Phase IIb trial investigating
GP2+GM-CSF administered in the adjuvant setting to node-positive and high-risk node-negative breast cancer patients with tumors
expressing any degree of HER2 (immuno-histochemistry [IHC] 1-3+) (NCT00524277) is now complete with 5 year follow-up. The
trial enrolled HLA-A02 patients randomized to receive GP2+GM-CSF versus GM-CSF alone. The trial’s primary objective was to determine
if treatment with GP2, a HER2-derived peptide, reduces recurrence rates.
Each
enrolled and consented subject was randomized and scheduled to receive a total of 6 GP2+GM-CSF (500 mcg GP2:125 mcg GM-CSF) or
placebo (125 mcg GM-CSF alone) intradermal injections every 3-4 weeks as part of the Primary Immunization Series (“PIS”)
for the first 6 months and 4 GP2+GM-CSF booster or placebo intradermal injections every 6 months thereafter. Boosters were introduced
during the trial, thus some patients did not receive all 4 boosters.
This
168 patient (Intent to Treat, “ITT”: n=180) basket trial across 16 clinical sites explored 96 HER2 3+ patients, who
received a standard course of trastuzumab after surgery and subsequently completed the full PIS or placebo, starting the PIS at
median 17.1 months after surgery, and 72 HER2 1-2+ patients, who did not receive trastuzumab after surgery and subsequently completed
the full PIS or placebo, starting the PIS at median 10.8 months after surgery. Subject disease characteristics are described in
Table 1.
Since
GP2 is synergistic with trastuzumab, and the HER2 1-2+ patients did not receive trastuzumab, it was prespecified to compare recurrence
rates ITT versus per protocol in these 2 distinct, independently reported populations, excluding those patients who did not complete
the PIS. Figure 1 depicts evidence that disease free survival (“DFS”) is more likely in HER2 3+ GP2-treated subjects
(p = 0.0338). Figure 2 provides DFS for the HER2 1-2+ group.
GP2
was shown to be well tolerated with no SAEs and elicited a potent immune response measured by local skin tests and immunological
assays, which suggest peak immunity is reached at 6 months upon completion of the PIS.
Table
1: Clinicopathologic Characteristics by Treatment Group for HER2 3+ and HER2 1-2+ Subjects Who Completed the PIS(1)
(1)
Continuous variables difference between treatment groups assessed by t-test. Categorical variables difference between treatment
group distribution assessed by chi-square test.
As
shown above, after 5 years of follow-up, the Kaplan-Meier estimated 5-year DFS rate in the 46 HER2 3+ patients treated with GP2+GM-CSF,
if the patient completed the PIS, was 100% versus 89.4% (95% CI:76.2, 95.5%) in the 50 placebo patients treated with GM-CSF (p
= 0.0338). As shown in Table 1, the treated versus placebo HER2 3+ patients were well-matched, where approximately 53% were
stage T1, 41% were stages T2-T4, 55% were node positive, 58% were hormone receptor positive and received endocrine therapy, 77%
received adjuvant radiation, 77% received adjuvant chemotherapy, and 89% received trastuzumab.
As shown
above, after 5 years of follow-up, the Kaplan-Meier estimated 5-year DFS rate in the 35 HER2 1-2+ patients treated with GP2+GM-CSF,
if the patient completed the PIS, was 77.1% (95% CI:59.5, 87.9%) versus 77.6% (95% CI:60.1, 88.2%) in the 37 placebo patients
treated with GM-CSF (p = 0.9142).
Safety
& Immune Response Data of GP2 Phase II Trial – Median 3 Year Data
A
median 3 year interim analysis of the GP2 Phase II trial was published in 2016 and presented efficacy, safety, and immunological
data, and a median 4 year interim analysis of the GP2 Phase II trial was published in April 2020. The safety and immunological
data is shown below.
In
both patient populations, GP2 was shown to be well tolerated, consisting of primarily injection site reactions which are caused
by GM-CSF and can be mitigated by reducing the GM-CSF dose (and then the GP2 dose, if necessary). No SAEs were reported in the
GP2 treated patients. Maximum local and systemic toxicities were primarily grade 1 and grade 2. Toxicities ranged from redness
at injection site to flu-like symptoms and can be largely attributed to GM-CSF, and not to GP2.
Toxicity:
The maximum local and systemic toxicity experienced by patients administered the GP2+GM-CSF vaccine were comparable to those experienced
by patients receiving GM-CSF alone. For patients receiving GP2 + GM-CSF, maximum local toxicities experienced during the primary
vaccination series were grade 1 (70%), grade 2 (28%), or grade 3 (1%). The most common toxicities included erythema, induration
and pruritis; the grade 3 toxicity was induration. Maximum systemic toxicities were grade 0 (13%), grade 1 (71%), grade 2 (15%),
or grade 3 (1%). The most common systemic toxicities included fatigue, headache, and myalgias. The grade 3 toxicity was a diffuse
maculopapular rash. The toxicities were comparable for patients receiving GM-CSF only, with maximum local toxicities being grade
1 (75%) or grade 2 (25%); and maximum systemic toxicities being grade 0 (21%), grade 1 (60%), grade 2 (15%), or grade 3 (3%).
The grade 3 systemic toxicities in this group included diffuse urticarial reactions, syncope and extremity pain.
GP2
immunotherapy elicited a potent immune response in HLA-A02 patients after they received the 6 primary intradermal injections over
the first 6 months. The immune response was measured by a local skin test and immunological assays. Further, booster injections
given every 6 months thereafter prolonged the immune response, thereby providing longer term protection.
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Immune
response was observed peaking after 6 months compared to baseline, measured by Delayed Type Hypersensitivity ((“DTH”)
skin test using GP2) and immunological assay. DTH response rate for treated patients is very high. Orthogonal mean baseline
versus six months: 4.1±1.1mm versus 15.3± 2.2mm (± standard error).
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Boosters
were administered every 6 months to sustain immunity.
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Planned
Phase III Trial
We
are planning to launch a Phase III clinical trial in 2021, using a similar treatment regime as the Phase IIb clinical trial. The
manufacturing plan and the Phase III trial protocol have been reviewed by the FDA, and final revisions to the Phase III trial
protocol are under way, which may include an interim analysis/adaptive trial design that will result in the finalization of the
size of the trial. The primary endpoint of the Phase III clinical trial will compare recurrence rate of GP2 + GM-CSF treated patients
versus placebo patients at various time points using standard of care follow-up. We believe that it may require up to 2 years
to fully enroll all patients for the trial, and that we may follow-up patients for up to a median 5 years following enrollment
in such trial; however the addition of an interim analysis may reduce the time required to report clinical data and to file a
BLA application. These design features of the Phase III clinical trial are currently being finalized by our clinical advisors.
An
overview of the Phase III clinical trial design is shown below.
We
have commenced GP2 manufacturing, and we are currently in the process of finalizing our engagement of CMOs and CROs for the Phase
III clinical trial.
Large
Initial & Expandable Breast Cancer Market
We
believe that the potential market for the proposed initial and follow-on indications is large. HER2/neu 3+ breast cancer
patients comprise approximately 25% of all breast cancer patients. Approximately 40% to 50% of the U.S. population contains the
HLA-A02 allele, while node positive and high risk node negative patients comprise approximately 50% of the market. Therefore,
we believe that the initial market for GP2 could be the combination of the three populations above which together comprises 6%
of breast cancer patients. We believe that follow-on indications could include additional HLA types (an additional 30% of the
U.S. population) and the low to intermediate expressors of HER2/neu 1-2+ patients (an additional 50% of all breast cancer
patients) which would expand the GP2 market from our estimated initial 6% to 30% of breast cancer patients who undergo surgery.
Thus the market for GP2, including follow-on indications, could be 2.4 times the current Herceptin adjuvant setting market, which
constitutes approximately 12.5% of breast cancer patients.
We
believe that the potential market for GP2 could be estimated as follows, with the long term multi-billion dollar annual revenue
potential of GP2 based on 16,750 to 79,800 potential new patients treated per year and Herceptin’s 2018 annual per patient
price of $74,500:
Competition
Cancer
immunotherapy has become a significant growth area for the biopharmaceutical industry, attracting large pharmaceutical companies
as well as small niche players. Generally, our principal competitors in the cancer immunotherapy market comprise both types of
companies with currently approved products for various indications, such as manufacturers of approved bispecific antibodies, CAR-T
cells, and checkpoint inhibitors, as well as companies currently engaged in cancer immunotherapy clinical development. The large
and medium-size players who have successfully obtained approval for cancer immunotherapy products include Bristol-Myers Squib
Company, Merck & Co., Inc., Genentech, Inc. (a subsidiary of Roche Holding AG), AstraZeneca PLC, Celgene Corporation, Johnson
& Johnson, Amgen, Novartis, Juno Therapeutics, Inc. (a subsidiary of Celgene), Kite Pharma, Inc., a wholly-owned subsidiary
of Gilead Sciences, Inc. and Pfizer, Inc./EMD Serono, Inc. Most of these companies, either alone or together with their collaborative
partners, have substantially greater financial resources than we do.
Companies
developing novel products with similar indications to those we are pursuing are expected to influence our ability to penetrate
and maintain market share. For patients with early stage breast cancer, adjuvant therapy is often given to prevent recurrence
and increase the chance of long-term disease free survival. Adjuvant therapy for breast cancer can include chemotherapy, hormonal
therapy, radiation therapy, or combinations thereof. In addition, the HER2 targeted drug Herceptin (trastuzumab) alone or in combination
with Perjeta (pertuzumab), both manufactured and marketed by Roche/Genentech, may be given to patients with tumors with high expression
of HER2/neu.
There
are a number of approved HER2/neu targeted therapies, some of which include the following: Genentech’s Herceptin,
Perjeta and Kadcyla (TDM-1, ado-trastuzumab emtansine); Puma’s Nerlynx; Daichi Sanko’s Enhertu (DS-8201, fam-trastuzumab
deruxtecan-nxki), and Seattle Genetics’ (Tukysa, tucatanib). In addition, the following biosimilars to trastuzumab have
been approved: Biocon/Mylan’s (Ogivri — trastuzumab-dkst; Celltrion/Teva’s (Herzuma — trastuzumab-pkrb);
Samsung/Biogen/Merck’s (Ontruzant — trastuzumab-dttb); Pfizer’s (Trazimera — trastuzumab-qyyp); and Allergan/Amgen’s
(Kanjinti; trastuzumab-anns). Furthermore, the following immune checkpoint inhibitors have also been approved or are under review
by the FDA to treat breast cancer patients: Merck’s Keytruda (pembrolizumab) and Genentech’s Tecentriq (atezolumab).
Moreover we believe that drug candidates from Sellas (formerly Galena), Marker (formerly TapImmune), Epithany, Antigen Express
(Generex subsidiary), and various companies pursuing neoantigen technologies are in clinical development and are being pursued
for different sub-populations or are behind GP2 in clinic development.
We
believe that GP2 will act synergistically with Herceptin, Perjeta, Nerlynx, and the newest entrants Kadcyla and Enhertu.
Many
of our competitors, either alone or with their strategic partners, have substantially greater financial, technical and human resources
than we do, and more experience in obtaining FDA and other regulatory approvals of treatments and in commercializing those treatments.
Accordingly, our competitors may be more successful than us in obtaining approval for cancer immunotherapy products and achieving
widespread market acceptance. Our competitors’ treatments may be more effectively marketed and sold than any products we
may commercialize, thus causing limited market share before we can recover the expenses of developing and commercializing our
cancer immunotherapy product candidate.
Mergers
and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among
a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. These activities may lead to consolidated efforts that
allow for more rapid development of cancer immunotherapy product candidates.
These
competitors also compete with us in the recruiting and retaining of qualified scientific and management personnel, the ability
to work with specific clinical contract organizations due to conflict of interest, and the conduct of trials in the ability to
recruit clinical trial sites and subjects for our clinical trials.
We
expect any products that we develop and commercialize to compete on the basis of, among other things, efficacy, safety, price,
and the availability of coverage and reimbursement from government and other third-party payors. Our commercial opportunity could
be reduced or eliminated if our competitors develop and commercialize products that are viewed as safer, more convenient, or less
expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products
more rapidly than we may obtain approval for our current product candidate or any other future product candidate, which could
result in our competitors establishing a strong market position before we are able to enter the market.
Manufacturing
We
do not own or operate manufacturing facilities for the production of our product candidate nor do we have plans to develop our
own manufacturing operations in the foreseeable future. We currently depend on third-party contract manufacturers for all of our
required raw materials, active pharmaceutical ingredients (“APIs”), and finished product candidate for our clinical
trials. We do not have any current contractual arrangements for the manufacture of commercial supplies of our product candidate.
For
prior clinical trials, GP2 was formulated, filled, labeled, stored, tested, packaged, and distributed to clinical sites by the
pharmacy at the Walter Reed Medical Center and the HJF. For future clinical trials, we anticipate that GP2 will be formulated,
filled, labeled, stored, tested, packaged, and distributed to clinical sites in licensed cGMP manufacturing facilities as we evaluate
and select primary and secondary facilities which may also serve as commercial facilities.
Exclusive
License
The
Henry M. Jackson Foundation out-licenses technology of the United States military and it conducts research and manages clinical
trials. HJF managed the GP2 Phase IIb clinical which was led by MD Anderson Cancer Center, oversaw all regulatory filings with
the FDA for all 4 GP2 clinical trials (including the three Phase I and the Phase IIb clinical trials), and possesses all patient
and manufacturing data from such trials.
In
April 2009, we entered into an exclusive license agreement, as amended, with HJF pursuant to which HJF granted us exclusive worldwide
rights to several U.S. and foreign patents and patent applications covering methods of using GP2 as an immunotherapy that elicits
a targeted immune response against HER2/neu-expressing cancers. In consideration for such licensed rights, we issued HJF
202,619 shares of our common stock. In addition, we are required to pay an annual maintenance fee and milestone payments of up
to an aggregate of $5.7 million. We are also required to make 2.5-5% royalty payments based on the sales of GP2 and to reimburse
HJF for patent expenses. To date we have not been required to make any milestone or royalty payments to HJF. The term of the exclusive
license shall terminate at such time that the last licensed patent or patent application expires or is abandoned, unless terminated
earlier pursuant to the terms of the exclusive license agreement. We may terminate the license by giving 90 days notice. HJF may
terminate the license if we do not make required payments, if we default in our performance obligations, if we do not sufficiently
develop and advance GP2 towards commercialization, and for various other reasons.
In
connection with the exclusive license agreement with HJF, we were the financial and corporate sponsors of the GP2 Phase IIb clinical
trial. HJF has provided us with all FDA correspondences and GP2 patient and manufacturing data for the history of the drug’s
development for all 4 clinical trials, and we have incorporated this data into our corporate investigational new drug application
(“IND”) with the FDA.
Intellectual
Property Portfolio
Our
commercial success depends in part on our ability to avoid infringing the proprietary rights of third parties, our ability to
obtain and maintain proprietary protection for our technologies where applicable, and our ability to prevent others from infringing
our proprietary rights. We intend to protect our proprietary technologies by, among other methods, evaluating relevant patents,
establishing defensive positions, monitoring European Union oppositions and pending intellectual property rights, preparing litigation
strategies in view of the U.S. legislative framework, and filing U.S. and international patent applications on technologies, inventions
and improvements that are important to our business. Patents and other intellectual property rights are crucial to our success.
We intend to protect our intellectual property rights through available means including filing and prosecuting patent applications
in the U.S. and other countries, protecting trade secrets, and utilizing regulatory protections such as data exclusivity. In addition,
we include restrictions regarding use and disclosure of our proprietary information in our contracts with third parties, and utilize
customary confidentiality agreements with our employees, consultants, clinical investigators, and scientific advisors to protect
our confidential information and know-how. Together with our licensors, we also rely on trade secrets to protect our combined
technology especially where we do not believe patent protection is appropriate or obtainable. It is our policy to operate without
knowingly infringing on, or misappropriating, the proprietary rights of others.
An
international patent law treaty (“PCT”) provides a unified procedure for filing patent applications to protect inventions
in each of its contracting states. Thus, a single PCT application can be converted into a national stage patent application in
any of the more than 145 PCT contracting states, and is considered a simple, cost-effective means for seeking patent protection
in numerous regions or countries. This nationalization (converting into an application in any of the contracting states) typically
occurs 18 months after the PCT application filing date. We also rely on trade secrets, know-how, and continuing technological
innovation to develop and maintain our proprietary position.
The
term of individual patents depends upon the legal term of the patents in countries in which they are obtained. In most countries,
including the U.S., the patent term is generally 20 years from the earliest date of filing a non-provisional patent application
in the applicable country. In the U.S., a patent’s term may, in certain cases, be lengthened by patent term adjustment,
which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in examining and granting a patent
or may be shortened if a patent is terminally disclaimed over a commonly owned patent or a patent naming a common inventor and
having an earlier expiration date.
HJF
License
Pursuant
to our exclusive license agreement with HJF, we were granted exclusive worldwide rights to several U.S. and foreign patents and
patent applications covering methods of using GP2. The GP2 issued patents provide protection ranging from 2026 through 2032 in
major markets such as the U.S., Europe, Japan, Australia, and Canada, with ongoing prosecution of pending patent applications
in other markets. We plan to register GP2 as a biologic, which may be subject to 10-12 years market exclusivity in the U.S. upon
receiving marketing approval.
The
following summarizes the two patent families subject to our exclusive license agreement with HJF. We have licensed rights to issued
patents and pending patent applications in certain countries with respect to the two patent families below and do not own or have
rights to any other patents or patent applications for GP2 or any other products:
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GP2
+ GM-CSF Patent Family — A patent application has been filed and licensed describing methods and compositions for the
induction of a cytotoxic T-cell response to the GP2 peptide with the effect of inducing and maintaining a protective or therapeutic
immunity against breast cancer. Patent claims describe the use of the GP2 technology including dosing, formulation, identification
of patients, and use in combination with GM-CSF. Patents issued in the U.S. will expire in 2032 and 2029 and international
patents will expire in 2029.
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GP2
+ Herceptin Patent Family — A patent application has been filed and licensed describing methods and compositions of
GP2 peptide in combination with a HER2/neu targeting antibody such as Herceptin. U.S. and certain foreign patent claims
describe the method and timing of administration. Patents issued in the U.S. will expire in 2028 and 2026 and international
patents will expire in 2026.
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Corporate
Strategy
We
do not have a sales, marketing, or product distribution strategy for our GP2 immunotherapy or any future product candidates because
GP2 is still in clinical development. Our future commercial strategy may include the use of strategic partners, distributors,
a contract sales force, or the establishment of our own commercial and specialty sales force for the U.S. market, as well as similar
strategies for regions and territories outside the U.S. We plan to further evaluate these options as we approach approval for
the use of our product candidate for one or more indications.
The
GP2 issued patents provide protection ranging from 2026 through 2032 in various markets, and we plan to register GP2 as a biologic,
which may be subject to 10-12 years market exclusivity in the U.S. upon receiving marketing approval. During this period of exclusivity,
we intend to advance GP2 into a Phase III clinical trial in the U.S. and pursue a European and global clinical trial strategy
to support GP2 registration outside of the U.S. We are considering various options to fund the Phase III clinical trial including
financing and/or strategic transactions. Our strategy during such time also includes building a commercialization team, pursuing
additional funding after this offering, and pursuing strategic collaborations to support the future global marketing and sales
of GP2. A long term global and regional licensing process has been initiated and will continue as the Phase III trial commences.
Pipeline
Strategy — Including GP2 In Other HER2/neu-Expressing Cancers
We
are developing follow-on indications for GP2 by designing and planning additional clinical trials to expand the breast cancer
patient population and to pursue additional HER2/neu-expressing cancers. Pending the receipt of sufficient capital, the
planned Phase III clinical trial can be supplemented with the following pipeline investments:
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The
efficacy of GP2-GMCSF-Herceptin can be explored in (1) other HLA patients in the same HER2/neu 3+ breast cancer patient
population, (2) breast cancer patients who are low to intermediate expressors of HER2/neu (1-2+) and who comprise two-thirds
of the triple negative market, or (3) other HER2/neu-expressing cancers including, but not limited to, ovarian, gastrointestinal,
and colon cancers.
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We
may acquire a preclinical platform that can be quickly advanced into IND-enabling GMP manufacturing and GLP toxicology studies
followed by initial human clinical trials.
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Government
Regulations
The
FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate,
among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling,
packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval
reporting of biologics such as those we are developing. Along with third-party contractors, we will be required to navigate the
various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which
we wish to conduct studies or seek approval or licensure of our current product candidate or any future product candidates. The
process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes
and regulations require the expenditure of substantial time and financial resources. A company can make only those claims relating
to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved
label.
The
process required by the FDA before biologic product candidates may be marketed in the U.S. generally involves the following:
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completion
of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good Laboratory Practices,
or GLP, regulations;
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submission
to the FDA of an IND, which must become effective before clinical trials may begin and must be updated annually or when significant
changes are made;
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approval
by an independent IRB or ethics committee at each clinical site before the trial is begun;
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performance
of adequate and well-controlled human clinical trials to establish the safety, purity and potency of the proposed biologic
product candidate for its intended purpose;
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preparation
of and submission to the FDA of a BLA, after completion of all pivotal clinical trials;
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satisfactory
completion of an FDA Advisory Committee review, if applicable;
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a
determination by the FDA within 60 days of its receipt of a BLA to file the application for review;
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satisfactory
completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is
produced to assess compliance with cGMP and to assure that the facilities, methods and controls are adequate to preserve the
biological product’s continued safety, purity and potency, and of selected clinical investigations to assess compliance
with GCP; and
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●
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FDA
review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the U.S.,
which must be updated annually when significant changes are made.
|
The
testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals
for our current product candidate or any future product candidates will be granted on a timely basis, if at all. Prior to beginning
the first clinical trial with a product candidate, we must submit an IND to the FDA. An IND is a request for authorization from
the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general
investigational plan and the protocol(s) for clinical studies. The IND also includes results of animal and in vitro studies assessing
the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product; chemistry, manufacturing,
and controls information; and any available human data or literature to support the use of the investigational product. An IND
must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by
the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial.
In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or
questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin
a clinical trial.
Clinical
trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators
in accordance with GCP, which include the requirement that all research subjects provide their informed consent for their participation
in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical
trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to
the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol
amendments. Furthermore, an IRB for each site proposing to conduct the clinical trial must review and approve the plan for any
clinical trial and its informed consent form before the clinical trial begins at that site and must monitor the clinical trial
until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including
a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated
objectives. Some studies also include oversight by a Data and Safety Monitoring Board, or DSMB, organized by the clinical trial
sponsor, which provides authorization for whether or not a clinical trial may move forward at designated check points based on
access to certain data from the clinical trial and may halt the clinical trial if it determines that there is an unacceptable
safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting
of ongoing clinical studies and clinical trial results to public registries.
For
purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap.
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●
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Phase
1 — The investigational product is initially introduced into healthy human subjects or patients with the target
disease or condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution
of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early
evidence on effectiveness.
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●
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Phase
2 — The investigational product is administered to a limited patient population with a specified disease or condition
to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and
safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive
Phase 3 clinical trials.
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●
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Phase
3 — The investigational product is administered to an expanded patient population to further evaluate dosage, to
provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically
dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational
product and to provide an adequate basis for product approval.
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●
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Phase
4 — In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a
product is approved to gain more information about the product. These so-called Phase 4 studies may be made a condition to
approval of the BLA.
|
Phase
1, Phase 2 and Phase 3 testing may not be completed successfully within a specified period, if at all, and there can be no assurance
that the data collected will support FDA approval or licensure of the product. Concurrent with clinical trials, companies may
complete additional animal studies and develop additional information about the biological characteristics of the product candidate
and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing
process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop
methods for testing the identity, strength, quality and purity of the final product, or for biologics, the safety, purity and
potency. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate
that the product candidate does not undergo unacceptable deterioration over its shelf life.
BLA
Submission and Review by the FDA
Assuming
successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product
development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the
product for one or more indications. The BLA must include all relevant data available from pertinent preclinical and clinical
studies, including negative or ambiguous results as well as positive findings, together with detailed information relating to
the product’s chemistry, manufacturing, controls, and proposed labeling, among other things. Data can come from company-sponsored
clinical studies intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources,
including studies initiated by investigators. The submission of a BLA requires payment of a substantial user fee to FDA, and the
sponsor of an approved BLA is also subject to annual product and establishment user fees. These fees are typically increased annually.
A waiver of user fees may be obtained under certain limited circumstances.
Once
a BLA has been submitted, the FDA’s goal is to review the application within ten months after it accepts the application
for filing, or, if the application relates to an unmet medical need in a serious or life-threatening indication, six months after
the FDA accepts the application for filing. The review process is often significantly extended by FDA requests for additional
information or clarification. The FDA reviews a BLA to determine, among other things, whether a product is safe, pure and potent
and the facility in which it is manufactured, processed, packed, or held meets standards designed to assure the product’s
continued safety, purity and potency. The FDA may convene an advisory committee to provide clinical insight on application review
questions. Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured.
The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance
with cGMP requirements and adequate to assure consistent production of the product within required specifications. If the FDA
determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies
in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional
information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
The
testing and approval process requires substantial time, effort and financial resources, and each may take several years to complete.
The FDA may not grant approval on a timely basis, or at all, and we may encounter difficulties or unanticipated costs in its efforts
to secure necessary governmental approvals, which could delay or preclude us from marketing our product. After the FDA evaluates
a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be
produced, the FDA may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing
of the product with specific
prescribing
information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete
and the application is not ready for approval. A Complete Response Letter may request additional information or clarification.
The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing
or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.
If
regulatory approval of a product is granted, such approval may entail limitations on the indicated uses for which such product
may be marketed. For example, the FDA may approve the BLA with a Risk Evaluation and Mitigation Strategy, or REMS, plan to mitigate
risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted
distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other
things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw
the product approval if compliance with pre- and post-marketing regulatory standards is not maintained or if problems occur after
the product reaches the marketplace. The FDA may require one or more Phase 4 post-market studies and surveillance to further assess
and monitor the product’s safety and effectiveness after commercialization and may limit further marketing of the product
based on the results of these post-marketing studies. In addition, new government requirements, including those resulting from
new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval
of our product under development.
A
sponsor may seek approval of its product candidate under programs designed to accelerate FDA’s review and approval of new
drugs and biological products that meet certain criteria. Specifically, new drugs and biological products are eligible for Fast
Track designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address
unmet medical needs for the condition. For a product candidate with Fast Track designation, the FDA may consider sections of the
BLA for review on a rolling basis before the complete application is submitted if relevant criteria are met. A Fast Track designated
product candidate may also qualify for priority review, under which the FDA sets the target date for FDA action on the BLA at
six months after the FDA accepts the application for filing. Priority review is granted when there is evidence that the proposed
product would be a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious
condition. If criteria are not met for priority review, the application is subject to the standard FDA review period of 10 months
after FDA accepts the application for filing. Priority review designation does not change the scientific/medical standard for
approval or the quality of evidence necessary to support approval.
Under
the Accelerated Approval program, the FDA may approve a BLA on the basis of either a surrogate endpoint that is reasonably likely
to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality,
that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account
the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Post-marketing studies
or completion of ongoing studies after marketing approval are generally required to verify the biologic’s clinical benefit
in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit.
In
addition, a sponsor may seek FDA designation of its product candidate as a Breakthrough Therapy, if the product candidate is intended,
alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition
and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on
one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. If
the FDA designates a breakthrough therapy, it may take actions appropriate to expedite the development and review of the application.
Breakthrough designation also allows the sponsor to file sections of the BLA for review on a rolling basis.
Fast
Track, Priority Review and Breakthrough Therapy designations do not change the standards for approval but may expedite the development
or approval process.
Other
Healthcare Laws and Compliance Requirements
Our
sales, promotion, medical education and other activities following product approval will be subject to regulation by numerous
regulatory and law enforcement authorities in the U.S. in addition to FDA, including potentially the Federal Trade Commission,
the Department of Justice, the Centers for Medicare and Medicaid Services, other divisions of the Department of Health and Human
Services and state and local governments. Our promotional and
scientific/educational
programs must comply with the federal Anti-Kickback Statute, the Foreign Corrupt Practices Act, the False Claims Act, or FCA,
the Veterans Health Care Act, physician payment transparency laws, privacy laws, security laws, and additional state laws similar
to the foregoing.
The
federal Anti-Kickback Statute prohibits, among other things, the offer, receipt, or payment of remuneration in exchange for or
to induce the referral of patients or the use of products or services that would be paid for in whole or part by Medicare, Medicaid
or other federal health care programs. Remuneration has been broadly defined to include anything of value, including cash, improper
discounts, and free or reduced price items and services. The government has enforced the Anti-Kickback Statute to reach large
settlements with healthcare companies based on sham research or consulting and other financial arrangements with physicians. Further,
a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a
violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal
Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. Many states have similar laws that apply
to their state health care programs as well as private payors.
The
FCA imposes liability on persons who, among other things, present or cause to be presented false or fraudulent claims for payment
by a federal health care program. The FCA has been used to prosecute persons submitting claims for payment that are inaccurate
or fraudulent, that are for services not provided as claimed, or for services that are not medically necessary. Actions under
the FCA may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Violations
of the FCA can result in significant monetary penalties and treble damages. The federal government is using the FCA, and the accompanying
threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology companies throughout
the country, for example, in connection with the promotion of products for unapproved uses and other sales and marketing practices.
The government has obtained multi-million and multibillion dollar settlements under the FCA in addition to individual criminal
convictions under applicable criminal statutes. In addition, companies have been forced to implement extensive corrective action
plans, and have often become subject to consent decrees or corporate integrity agreements, restricting the manner in which they
conduct their business. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, also created federal
criminal statutes that prohibit, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit
program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact
or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare
benefits, items or services. Given the significant size of actual and potential settlements, it is expected that the government
will continue to devote substantial resources to investigating healthcare providers’ and manufacturers’ compliance
with applicable fraud and abuse laws.
In
addition, there has been a recent trend of increased federal and state regulation of payments made to physicians and other healthcare
providers. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or
collectively, the Affordable Care Act, among other things, imposed new reporting requirements on drug manufacturers for payments
or other transfers of value made by them to physicians and teaching hospitals, as well as ownership and investment interests held
by physicians and their immediate family members. Failure to submit required information may result in civil monetary penalties.
Certain states also mandate implementation of commercial compliance programs, impose restrictions on drug manufacturer marketing
practices and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians and other healthcare
professionals.
We
may also be subject to data privacy and security regulation by both the federal government and the states in which it conducts
its business. HIPAA, as amended by HITECH, and their respective implementing regulations, imposes specified requirements relating
to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s
privacy and security standards directly applicable to “business associates,” defined as independent contractors or
agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing
a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against
covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil
actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs
associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information
in certain circumstances, many of which differ from each other in significant ways and may not have the same effect.
If
our operations are found to be in violation of any of such laws or any other governmental regulations that apply to it, we may
be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring
of our operations, exclusion from participation in federal and state healthcare programs and imprisonment, any of which could
adversely affect our ability to operate our business and our financial results.
Also,
the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries
from making improper payments to foreign officials for the purpose of obtaining or retaining business. We cannot assure you that
our internal control policies and procedures will protect us from reckless or negligent acts committed by our employees, future
distributors, partners, collaborators or agents. Violations of these laws, or allegations of such violations, could result in
fines, penalties or prosecution and have a negative impact on our business, results of operations and reputation.
Coverage
and Reimbursement
Sales
of pharmaceutical products depend significantly on the availability of third-party coverage and reimbursement. Third-party payors
include government health administrative authorities, managed care providers, private health insurers and other organizations.
Although we currently believe that third-party payors will provide coverage and reimbursement for our product candidate, if approved,
these third-party payors are increasingly challenging the price and examining the cost-effectiveness of medical products and services.
In addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare products. We may need
to conduct expensive clinical studies to demonstrate the comparative cost-effectiveness of our product candidate. Seeking coverage
and reimbursement from third-party payors can be time consuming and expensive. Moreover, a payor’s decision to provide coverage
for a drug product does not imply that an adequate reimbursement rate will be approved. Reimbursement may not be available or
sufficient to allow us to sell our product on a competitive and profitable basis.
Foreign
Regulation
In
addition to regulations in the U.S., we are and will be subject, either directly or through our distribution partners, to a variety
of regulations in other jurisdictions governing, among other things, clinical trials and commercial sales and distribution of
our product, if approved.
Whether
or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in non-U.S. countries
prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the
U.S. have processes that require the submission of a clinical trial application much like an IND prior to the commencement of
human clinical trials. In Europe, for example, a clinical trial application, or CTA, must be submitted to the competent national
health authority and to independent ethics committees in each country in which a company plans to conduct clinical trials. Once
the CTA is approved in accordance with a country’s requirements, clinical trials may proceed in that country.
The
requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country
to country, even though there is already some degree of legal harmonization in the European Union member states resulting from
the national implementation of underlying E.U. legislation. In all cases, the clinical trials are conducted in accordance with
GCP and other applicable regulatory requirements.
To
obtain regulatory approval of a new drug or medicinal product in the European Union, a sponsor must obtain approval of a marketing
authorization application. The way in which a medicinal product can be approved in the European Union depends on the nature of
the medicinal product.
The
centralized procedure results in a single marketing authorization granted by the European Commission that is valid across the
European Union, as well as in Iceland, Liechtenstein and Norway. The centralized procedure is compulsory for human drugs that
are: (i) derived from biotechnology processes, such as genetic engineering, (ii) contain a new active substance indicated for
the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative diseases, autoimmune and other immune
dysfunctions and viral diseases, (iii) officially designated as “orphan drugs” and (iv) advanced-therapy medicines,
such as gene-therapy, somatic cell-therapy or tissue-engineered medicines. The centralized procedure may, at the request of the
applicant, also be used for human drugs which do not fall within the above mentioned categories if the human drug (a) contains
a new active substance which was not authorized in the European Community; or (b) the applicant shows that the medicinal product
constitutes a significant therapeutic, scientific or technical innovation or that the granting of authorization in the centralized
procedure is in the interests of patients or animal health at the European Community level.
Under
the centralized procedure in the European Union, the maximum timeframe for the evaluation of a marketing authorization application
by the EMA is 210 days (excluding clock stops, when additional written or oral information is to be provided by the applicant
in response to questions asked by the Committee for Medicinal Products for Human Use, or CHMP), with adoption of the actual marketing
authorization by the European Commission thereafter. Accelerated evaluation might be granted by the CHMP in exceptional cases,
when a medicinal product is expected to be of a major public health interest from the point of view of therapeutic innovation,
defined by three cumulative criteria: the seriousness of the disease to be treated; the absence of an appropriate alternative
therapeutic approach, and anticipation of exceptional high therapeutic benefit. In this circumstance, EMA ensures that the evaluation
for the opinion of the CHMP is completed within 150 days and the opinion issued thereafter.
The
mutual recognition procedure, or MRP, for the approval of human drugs is an alternative approach to facilitate individual national
marketing authorizations within the European Union. The MRP may be applied for all human drugs for which the centralized procedure
is not obligatory. The MRP is applicable to the majority of conventional medicinal products, and is based on the principle of
recognition of an already existing national marketing authorization by one or more member states.
The
characteristic of the MRP is that the procedure builds on an already existing marketing authorization in a member state of the
E.U. that is used as reference in order to obtain marketing authorizations in other E.U. member states. In the MRP, a marketing
authorization for a drug already exists in one or more member states of the E.U. and subsequently marketing authorization applications
are made in other European Union member states by referring to the initial marketing authorization. The member state in which
the marketing authorization was first granted will then act as the reference member state. The member states where the marketing
authorization is subsequently applied for act as concerned member states.
The
MRP is based on the principle of the mutual recognition by European Union member states of their respective national marketing
authorizations. Based on a marketing authorization in the reference member state, the applicant may apply for marketing authorizations
in other member states. In such case, the reference member state shall update its existing assessment report about the drug in
90 days. After the assessment is completed, copies of the report are sent to all member states, together with the approved summary
of product characteristics, labeling and package leaflet. The concerned member states then have 90 days to recognize the decision
of the reference member state and the summary of product characteristics, labeling and package leaflet. National marketing authorizations
shall be granted within 30 days after acknowledgement of the agreement.
Should
any Member State refuse to recognize the marketing authorization by the reference member state, on the grounds of potential serious
risk to public health, the issue will be referred to a coordination group. Within a timeframe of 60 days, member states shall,
within the coordination group, make all efforts to reach a consensus. If this fails, the procedure is submitted to an EMA scientific
committee for arbitration. The opinion of this EMA Committee is then forwarded to the Commission, for the start of the decision-making
process. As in the centralized procedure, this process entails consulting various European Commission Directorates General and
the Standing Committee on Human Medicinal Products or Veterinary Medicinal Products, as appropriate.
For
other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing
the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again,
the clinical trials are conducted in accordance with GCP and the other applicable regulatory requirements.
If
we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension
of clinical trials, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions
and criminal prosecution.
Employees
As
of December 1, 2020, we had no full-time employees and 3 part-time employees. We are not a party to any collective bargaining
agreements. We believe that we maintain good relations with our employees.
Facilities
As
of December 1, 2020, we sublease a facility to support manufacturing and clinical trial operations and contract research and development
and manufacturing to commercial contract facilities.
Legal
Proceedings
We
may be involved from time to time in ordinary litigation, negotiation, and settlement matters that will not have a material effect
on our operations or finances. We are not currently party to any material legal proceedings, and we are not aware of any pending
or threatened litigation against us.
MANAGEMENT
Directors
and Executive Officers
The
following table sets forth the name, age and position of each of our executive officers, key employees and directors as of December
1, 2020.
Name
|
|
Age
|
|
Position
|
Snehal
Patel
|
|
57
|
|
Chief
Executive Officer, Chief Financial Officer and Director
|
F.
Joseph Daugherty
|
|
70
|
|
Chief
Medical Officer and Director
|
Jaye
Thompson
|
|
55
|
|
Vice
President Clinical & Regulatory Affairs
|
David
McWilliams
|
|
77
|
|
Chairman
of the Board
|
Eric
Rothe
|
|
45
|
|
Director
|
Kenneth
Hallock
|
|
72
|
|
Director
|
Snehal
Patel. Snehal Patel has over 30 years of experience in executive management, corporate development, operations, and investment
banking in the healthcare industry. Mr. Patel has served as our Chief Executive Officer since June 2016 and our Chief Financial
Officer and a member of our board of directors since February 2010. In addition, since 2009, Mr. Patel has served as a consultant,
manager, and advisor at various levels in multiple private start-up biotech companies helping to develop clinical and pre-clinical
assets in cancer and other therapeutic areas. Prior to 2010, Mr. Patel served as a consultant to public and private companies
focused on stem cell therapy, multiple sclerosis t-cell therapy, oncolytic viruses, and disposable biotech manufacturing equipment.
In addition, Mr. Patel previously served as an investment banker at Sanders Morris Harris, Ferghana Partners, and JP Morgan Chase
focusing on healthcare and biotech financing and strategic transactions. Mr. Patel also previously worked in operations and business
development at Bayer Corporation and in design and operations consulting firms. Mr. Patel received a Bachelor of Science degree
in chemical engineering and a Master of Science degree in biochemical engineering from the Massachusetts Institute of Technology
and a Masters of Business Administration degree from the University of Chicago. We believe Mr. Patel is qualified to serve as
a member of our board of directors because of his executive and management experience working with biotech companies.
F.
Joseph Daugherty. F. Joseph Daugherty has over 35 years of experience in managing and overseeing biotechnology and biomedical
projects. Dr. Daugherty has served as our Chief Medical Officer since September 2019 and a member of our board of directors since
September 2019. In addition, since 2002, Dr. Daugherty has served as the Managing Partner of Phenolics, LLC and PharmaPrint, LLC
which was spun off from Phenolics, LLC, both of which are nutraceutical companies. From 2002 until 2018, he served first as President,
and since 2008 as Chief Executive Officer, Chief Medical Officer and the Chairman of the board of directors of Eleos Inc., a clinical
stage private biotech company focused on anti-sense technology in cancer. Dr. Daugherty also served in various other capacities
as a management consultant as well as an officer and director to over 20 public and private biomedical companies including Dupont.
In addition, Dr. Daugherty was President of ConAgra’s biotech division. Dr. Daugherty received a Bachelor of Arts degree
in biology from Washington University, a Doctor of Medicine degree from the University of Nebraska Medical Center and a Masters
of Science in Industrial Administration from Carnegie-Mellon University (Tepper). We believe Dr. Daugherty is qualified to serve
as a member of our board of directors because of his executive and management experience, including his experience working with
biotech companies.
Jaye
Thompson. Jaye Thompson has over 30 years of experience in pharmaceutical and device product development. Dr. Thompson has
served as our Vice President Clinical & Regulatory Affairs since September 2019. Since December 2017, Dr. Thompson has served
as a co-founder and Chief Operating Officer of Proxima Clinical Research, Inc., a clinical research service provider. Dr. Thompson
previously served as Senior Vice President of Clinical and Regulatory Affairs of Repros Therapeutics, a reproductive health company,
from March 2013 to May 2017 and as a member of the board of directors of Repros Therapeutics from November 2009 to March 2013.
Dr. Thompson previously served as Senior Vice President of Clinical Development and Regulatory Affairs of Opexa Therapeutics,
a multiple sclerosis cell therapy company, from September 2009 to March 2013. In addition, Dr. Thompson has served at clinical
stage biotech companies, in various senior clinical and regulatory roles and at inVentiv Clinical Solutions, a clinical research
service provider. Dr. Thompson was the president and founder of SYNERGOS, Inc., a clinical research service provider, which was
founded in 1991, and acquired by inVentiv Health, as a wholly-owned subsidiary in 2006. Dr. Thompson has advised several of the
region’s leading life science companies on strategic and regulatory planning as well as clinical product development. She
has directed and managed statistical analysis, data
management,
report writing, and the conduct of clinical trials for a wide variety of indications. Dr. Thompson has been actively involved
in over 200 clinical trials for drugs, biologics and devices, and has been associated with numerous FDA regulatory submissions.
Dr. Thompson has often represented sponsor companies at FDA meetings and advisory committee meetings, and she was appointed to
the Governor’s Texas Emerging Technology Fund Advisory Committee. Dr. Thompson received a BS in applied mathematics from
Texas A&M University and an MS and a PhD in biostatistics from the University of Texas Health Science Center in Houston.
David
McWilliams. David McWilliams has over 40 years of experience in building biopharmaceutical and healthcare companies. Mr. McWilliams
has served as a member of our board of directors since February 2009. He previously served as the Chief Executive Officer from
February 2010 to June 2016 and Chairman of the board of directors of the Company since February 2009. In addition, since 2008,
Mr. McWilliams has served as a consultant and an advisor at various levels in multiple private start-up biotech companies to help
develop clinical and pre-clinical assets in cancer and other therapeutic areas. Mr. McWilliams previously served as the Chief
Executive Officer and a member of the board of directors of Opexa Therapeutics, Inc., a multiple sclerosis cell therapy company,
from 2004 until 2008. Mr. McWilliams also previously served as the Chief Executive Officer, President and a member of the board
of directors of Bacterial Barcodes, Inc., a bacteria and fungi diagnostic company, and the Chief Executive Officer and a member
of the board of directors of Signase, Inc., a cancer therapeutics company. Mr. McWilliams has also served in various other capacities
including Chief Executive Officer, President and a member of the board of directors of both Encysive Pharmaceuticals, Inc. and
Repros Therapeutics Inc.; Chief Executive Officer and President of Kallestad Diagnostics (Erbamont); President of Harleco Diagnostics
Division (EM Industries); General Manager and Program Manager of Abbott Laboratories; and Management Consultant at McKinsey &
Company. In addition to the foregoing, Mr. McWilliams currently serves as the Chairman of the board of directors of BioHouston,
an advocate of the life sciences industry in Houston. Mr. McWilliams received a Bachelor of Arts degree in chemistry from Washington
and Jefferson College and a Master of Business Administration degree from the University of Chicago. We believe Mr. McWilliams
is qualified to serve as a member of our board of directors because of his executive experience, management experience and experience
working with biotech companies.
Eric
Rothe. Eric Rothe is the founder of the Company and has over 12 years of industry and academic experience in gene-based therapies
and vaccines, including six years of laboratory experience. Mr. Rothe previously served as President of the Company from October
2006 to February 2010, Chief Executive Officer of the Company from October 2007 to February 2010 and Chairman of the Company’s
board of directors from October 2006 to February 2009. In addition, Mr. Rothe has served as a member of the Company’s board
of directors since August 2006. Since August 2017, Mr. Rothe has served as the Global Product Line Leader at Baker Hughes, an
energy technology company. Previously, from September 2014 until its acquisition by GE Oil & Gas’ acquisition of Baker
Hughes in July 2017, Mr. Rothe served as Vice President of Mid-Continent and NE US Geomarket and Global Product Line Leader of
GE Oil & Gas. From 2012 to 2014, Mr. Rothe served as the International Sales and Operations Director at National Oilwell Varco,
one of the world’s largest oil field equipment providers. Before joining the oil & gas sector, Mr. Rothe was Director
of the Clinical Cancer Genetics program at U.T. M.D. Anderson Cancer Center, Project Manager at Introgen, a developer of cancer
products in advanced clinical trials, and provided consulting services for start-up/small biotechnology companies in Texas. Mr.
Rothe received a Bachelor of Arts degree in molecular and cell biology from the University of California at Berkeley and a Master
of Business Administration degree from Rice University. We believe Mr. Rothe is qualified to serve as a member of our board of
directors because of his expertise in cancer immunology, GMP manufacturing, and clinical research, and his experience in various
senior management positions in global commercial operations at large corporations.
Kenneth
Hallock. Kenneth Hallock has over 40 years of experience in general management and new venture start-ups and is a major investor
in our Company. Mr. Hallock has served as a member of our board of directors since September 2019. Mr. Hallock is currently a
senior manager and partner in a private start-up equipment manufacturing company and has been in this role for over 10 years.
Previously, Mr. Hallock worked in large industrial corporations such as NL Industries and Anderson Clayton, which were subsequently
acquired. Mr. Hallock received a Bachelor of Engineering degree in chemical engineering from Princeton University and a Master
of Business Administration degree from Harvard Business School. We believe Mr. Hallock is qualified to serve as a member of our
board of directors because of his experience in various management positions for several Fortune 500 companies.
Family
Relationships
There
are no family relationships among any of our executive officers or directors.
Director
Independence
Our
board of directors undertook a review of the independence of our directors and considered whether any director has a relationship
with us that could compromise that director’s ability to exercise independent judgment in carrying out that director’s
responsibilities. Our board of directors has affirmatively determined that David McWilliams, Eric Rothe and Kenneth Hallock are
each an “independent director,” as defined under the Nasdaq rules.
Committees
of Our Board of Directors
Our
board of directors directs the management of our business and affairs, as provided by Delaware law, and conducts its business
through meetings of the board of directors and its standing committees. We have a standing audit committee and compensation committee.
Our entire board of directors serves in place of a nominating and corporate governance committee. In addition, from time to time,
special committees may be established under the direction of the board of directors when necessary to address specific issues.
Audit
Committee
Our
audit committee is responsible for, among other things:
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approving
and retaining the independent auditors to conduct the annual audit of our financial statements;
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reviewing
the proposed scope and results of the audit;
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reviewing
and pre-approving audit and non-audit fees and services;
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reviewing
accounting and financial controls with the independent auditors and our financial and accounting staff;
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reviewing
and approving transactions between us and our directors, officers and affiliates;
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establishing
procedures for complaints received by us regarding accounting matters;
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overseeing
internal audit functions, if any; and
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preparing
the report of the audit committee that the rules of the SEC require to be included in our annual meeting proxy statement.
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Our
audit committee consists of David McWilliams, Eric Rothe and Kenneth Hallock, with David McWilliams serving as chair. Our board
of directors has affirmatively determined that David McWilliams, Eric Rothe and Kenneth Hallock each meet the definition of “independent
director” under the Nasdaq rules, and that they meet the independence standards under Rule 10A-3. Each member of our audit
committee meets the financial literacy requirements of the Nasdaq rules. In addition, our board of directors has determined that
David McWilliams qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of
Regulation S-K. Our board of directors adopted a written charter for the audit committee, which is available on our principal
corporate website at www.greenwichlifesciences.com.
Compensation
Committee
Our
compensation committee is responsible for, among other things:
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reviewing
and recommending the compensation arrangements for management, including the compensation for our president and chief executive
officer;
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establishing
and reviewing general compensation policies with the objective to attract and retain superior talent, to reward individual
performance and to achieve our financial goals;
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administering
our stock incentive plans; and
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preparing
the report of the compensation committee that the rules of the SEC require to be included in our annual meeting proxy statement.
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Our
compensation committee consists of David McWilliams, Eric Rothe and Kenneth Hallock, with David McWilliams serving as chair. Our
board has determined that David McWilliams, Eric Rothe and Kenneth Hallock are independent directors under Nasdaq rules. Our board
of directors adopted a written charter for the compensation committee, which is available on our principal corporate website at
www.greenwichlifesciences.com.
Nominating
and Governance
Although
our entire board of directors serves in place of a nominating and corporate governance committee, our independent directors on
the board are responsible for, among other things:
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nominating
members of the board of directors;
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developing
a set of corporate governance principles applicable to our company; and
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overseeing
the evaluation of our board of directors.
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Our
entire board of directors serves in place of a nominating and corporate governance committee. Our board of directors adopted resolutions
addressing, among other things, the nomination process.
Code
of Business Conduct and Ethics
Our
code of business conduct and ethics applies to our directors, officers and employees, including our principal executive officer,
principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the
code is posted on our website, www.greenwichlifesciences.com. In addition, we intend to post on our website all disclosures
that are required by law or the Nasdaq rules concerning any amendments to, or waivers from, any provision of the code.
EXECUTIVE
AND DIRECTOR COMPENSATION
Summary
Compensation Table
The
following table presents the compensation awarded to, earned by or paid to each of our named executive officers for the year ended
December 31, 2019.
Name
and Principal Position
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Year
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Salary
($)
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Bonus
($)
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Stock
awards
($)(1)
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Option
awards
($)
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Nonequity
incentive
plan
compensation
($)
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Nonqualified
deferred
compensation
earnings
($)
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All
other
compensation
($)(2)
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Total
($)
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Snehal
Patel,
Chief Executive Officer
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2019
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—
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—
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122,750
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—
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—
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—
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16,423
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139,173
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(1)
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For
2019 fiscal year, Mr. Patel received 148,254 shares of our common stock for services rendered and as incentive for services
to be rendered. Mr. Patel did not receive any options or warrants for the 2019 fiscal year.
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(2)
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For
fiscal year 2019, Mr. Patel received (i) 4,494,383 shares of our common stock in exchange for related party payables for the
periods from January 1, 2010 through September 30, 2019 and (ii) 1,656,607 shares of our common stock in exchange for warrants
to purchase shares of our common stock.
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Outstanding
Equity Awards at December 31, 2019
The
following table provides information regarding awards held by each of our named executive officers that were outstanding as of
December 31, 2019. There were other equity awards outstanding as of December 31, 2019.
Stock
Awards
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Name
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Number
of Shares or Units of Stock That Have Not Vested (#)
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Market
Value of Shares or Units of Stock That Have Not Vested ($)
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Snehal
Patel
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600,810
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(1)
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1,347,500
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(1)
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We
granted Mr. Patel 749,064 shares of common stock on September 30, 2019 for compensation and incentives of which 93,633 vested
immediately upon grant, and the balance, or 655,431 shares of common stock vest over 36 equal monthly installments commencing
on October 1, 2019.
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Non-Employee
Director Compensation
The
following table presents the total compensation for each person who served as a non-employee member of our board of directors
and received compensation for such service during the fiscal year ended December 31, 2019. Other than as set forth in the table
and described more fully below, we did not pay any compensation, make any equity awards or non-equity awards to, or pay any other
compensation to any of the non-employee members of our board of directors in 2019.
Name
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Stock
awards
($)
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All
other
compensation
($)(4)
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Total
($)
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David
McWilliams(1)
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5,249
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1,111
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6,360
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Eric
Rothe(2)
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3,498
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781
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4,279
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Kenneth
Hallock(3)
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3,498
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1,938
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5,436
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(1)
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On
September 30, 2019, we authorized the issuance of 28,090 shares of its common stock to Mr. McWilliams. The shares vest in
36 equal monthly installments with the first installment vesting on October 1, 2019. Of such shares, 2,343 shares of common
stock vested as of December 31, 2019. Mr. McWilliams did not receive any options or warrants during the 2019 fiscal year.
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(2)
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On
September 30, 2019, we authorized the issuance of 18,727 shares of its common stock to Mr. Rothe. The shares vest in 36 equal
monthly installments with the first installment vesting on October 1, 2019. Of such shares, 1,563 shares of common stock vested
as of December 31, 2019. Mr. Rothe did not receive any options or warrants during the 2019 fiscal year.
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(3)
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On
September 30, 2019, we authorized the issuance of 18,727 shares of its common stock to Mr. Hallock. The shares vest in 36
equal monthly installments with the first installment vesting on October 1, 2019. Of such shares, 1,563 shares of common stock
vested as of December 31, 2019. Mr. Hallock did not receive any options or warrants during the 2019 fiscal year.
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(4)
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Mr.
McWilliams received (i) 149,813 shares of our common stock in exchange for related party payables for the periods from January
1, 2010 through June 30, 2016 and (ii) 266,436 shares of our common stock in exchange for warrants to purchase shares of common
stock. Mr. Rothe received (i) 37,454 shares of our common stock in exchange for related party payables for the periods from
January 1, 2010 through June 30, 2016 and (ii) 255,005 shares of our common stock in exchange for warrants to purchase shares
of common stock. Mr. Hallock received (i) 514,982 shares of our common stock in exchange for related party payables for the
periods from January 1, 2010 through June 30, 2016 and (ii) 210,675 shares of our common stock in exchange for warrants to
purchase shares of common stock.
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Employment
Agreements
Snehal
Patel Employment Agreement
On
September 29, 2020, we entered into an employment agreement (the “Employment Agreement”) with Snehal Patel, our Chief
Executive Officer in connection with our initial public offering (the “IPO”). The term of the Employment Agreement
will continue until December 31, 2021 and automatically renews for successive one year periods at the end of each term until either
party delivers written notice of their intent not to renew at least 60 days prior to the expiration of the then effective term.
Pursuant to the terms of the Employment Agreement, Mr. Patel shall, among other things, (i) receive a base salary of $450,000,
subject to increase, (ii) shall be eligible to receive equity grants, (iii) shall be eligible to receive an annual bonus of up
to 50% of his then base salary and (iv) shall be eligible to receive a strategic transaction bonus. In addition, Mr. Patel shall
also be eligible to participate in all employee welfare and benefit plans and shall receive such other fringe benefits as we offer
to our senior executives and directors.
In
the event Mr. Patel’s employment is terminated by us for Cause (as defined in the Employment Agreement), as a result of
Mr. Patel’s death or Disability (as defined in the Employment Agreement), voluntarily by Mr. Patel without Good Reason (as
defined in the Employment Agreement), or upon expiration of the term, we shall pay Mr. Patel (i) a lump sum amount equal to (A)
any unpaid base salary and equity grants then due plus (B) any bonus earned but not paid and (ii) any unpaid expenses (collectively,
the “Patel Compensation”). In addition, if Mr. Patel’s employment is terminated for death, Disability or as
a result of the expiration of the term of the Employment Agreement as a result of the non-renewal of such term by us, we shall
pay Mr. Patel any pro-rated bonus for the target year in which the termination occurs. In the event Mr. Patel’s employment
is terminated by us without Cause or by Mr. Patel for Good Reason, we shall pay Mr. Patel (i) the Patel Compensation, (ii) any
pro-rated bonus for the target year in which the termination occurs and (iii) provided that Mr. Patel executes the Release (as
defined in the Employment Agreement), (A) the Severance Payment (as defined in the Employment Agreement) and (B) COBRA premiums
for twelve months from the date of termination. In the event of Mr. Patel’s termination (i) by us without Cause or by Mr.
Patel for Good Reason within six months prior to the consummation of a Change of Control (as defined in the Employment Agreement)
transaction, if, prior to or as of such termination, a Change of Control transaction was Pending (as defined in the Employment
Agreement), at any time during such six month period, (ii) by Mr. Patel for Good Reason at any time within twelve months after
the consummation of a Change of Control, or (iii) by us without Cause at any time within twelve months after the consummation
of a Change of Control, Mr. Patel shall receive (A) the Patel Compensation, (B) any pro-rated bonus for the target year in which
the termination occurs and (C) provided that Mr. Patel executes the Release, (a) a lump sum amount equal to twelve months of Mr.
Patel’s then base salary and equity grants at the rate in effect as of the date of termination and (b) COBRA premiums for
six months from the date of termination. Furthermore, all of the shares that are then unvested shall immediately vest and, all
options, warrants and other convertible securities beneficially held by Mr. Patel shall become fully exercisable for (i) a period
of six months following the date of termination only if at the time of such termination there is a Change of Control transaction
Pending but in no event beyond expiration of the original term of the award or (ii) if clause (i) does not apply, then such period
of time set forth in the agreement evidencing the security. The Employment Agreement also contains covenants restricting Mr. Patel
from: (i) engaging in any activity competitive with our business during the term of the Employment Agreement and for a period
of one year thereafter; and (ii) soliciting our customers, suppliers or employees during the term of the Employment Agreement
and for a period of one year thereafter.
2019
Equity Incentive Plan
Summary
Our
2019 Equity Incentive Plan (the “2019 Plan”) was adopted by our board of directors on September 30, 2019 and by our
stockholders on September 30, 2019. Having an adequate number of shares available for future equity compensation grants is necessary
to promote our long-term success and the creation of stockholders value by:
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Enabling
us to continue to attract and retain the services of key service providers who would be eligible to receive grants;
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Aligning
participants’ interests with stockholders’ interests through incentives that are based upon the performance of
our common stock;
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Motivating
participants, through equity incentive awards, to achieve long-term growth in the Company’s business, in addition to
short-term financial performance; and
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Providing
a long-term equity incentive program that is competitive as compared to other companies with whom we compete for talent.
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The
2019 Plan permits the discretionary award of incentive stock options (“ISOs”), nonstatutory stock options (“NQSOs”),
restricted stock, restricted stock units (“RSUs”), stock appreciation rights (“SARs”), other equity awards
and/or cash awards to selected participants. The 2019 Plan will remain in effect until the earlier of (i) September 30, 2029 and
(ii) the date upon which the 2019 Plan is terminated pursuant to its terms, and in any event subject to the maximum share limit
of the 2019 Plan.
The
2019 Plan provides for the reservation of 1,498,128 shares of common stock for issuance thereunder (the “Share Limit”),
and provides that the maximum number of shares that may be issued pursuant to the exercise of ISOs is 1,498,128 (the “ISO
Limit”). The number of shares available for issuance under the 2019 Plan constituted approximately 14.47% of our issued
and outstanding shares of common stock on a fully diluted basis as of the date of board approval.
Key
Features of the 2019 Plan
Certain
key features of the 2019 Plan are summarized as follows:
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If
not terminated earlier by our board of directors, the 2019 Plan will terminate on September 30, 2029.
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Up
to a maximum aggregate of 1,498,128 shares of common stock may be issued under the 2019 Plan. The maximum number of shares
that may be issued pursuant to the exercise of ISOs is also 1,498,128.
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The
2019 Plan will generally be administered by a committee comprised solely of independent members of our board of directors.
This committee will be the Compensation Committee unless otherwise designated by our board of directors (the “Committee”).
The board may designate a separate committee to make awards to employees who are not officers subject to the reporting requirements
of Section 16 of the Exchange Act.
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Employees,
consultants and board members are eligible to receive awards, provided that the Committee has the discretion to determine
(i) who shall receive any awards, and (ii) the terms and conditions of such awards.
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Awards
may consist of ISOs, NQSOs, restricted stock, RSUs, SARs, other equity awards and/or cash awards.
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Stock
options and SARs may not be granted at a per share exercise price below the fair market value of a share of our common stock
on the date of grant.
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Stock
options and SARs may not be repriced or exchanged without stockholder approval.
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The
maximum exercisable term of stock options and SARs may not exceed ten years.
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Awards
are subject to recoupment of compensation policies adopted by us.
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Eligibility
to Receive Awards. Employees, consultants and our board members and certain of our affiliated companies are eligible to
receive awards under the 2019 Plan. The Committee determines, in its discretion, the selected participants who will be granted
awards under the 2019 Plan.
Shares
Subject to the 2019 Plan. The maximum number of shares of common stock that can be issued under the 2019 Plan is 1,498,128
shares.
The
shares underlying forfeited or terminated awards (without payment of consideration), or unexercised awards become available again
for issuance under the 2019 Plan. No fractional shares may be issued under the 2019 Plan. No shares will be issued with respect
to a participant’s award unless applicable tax withholding obligations have been satisfied by the participant.
Administration
of the 2019 Plan. The 2019 Plan will be administered by our board’s Compensation Committee, acting as the Committee,
which shall consist of independent board members. With respect to certain awards issued under the 2019 Plan, the members of the
Committee also must be “Non-Employee Directors” under Rule 16b-3 of the Exchange Act. Subject to the terms of the
2019 Plan, the Committee has the sole discretion, among other things, to:
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Select
the individuals who will receive awards;
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Determine
the terms and conditions of awards (for example, performance conditions, if any, and vesting schedule);
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Correct
any defect, supply any omission, or reconcile any inconsistency in the 2019 Plan or any award agreement;
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Accelerate
the vesting, extend the post-termination exercise term or waive restrictions of any awards at any time and under such terms
and conditions as it deems appropriate, subject to the limitations set forth in the 2019 Plan;
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Permit
a participant to defer compensation to be provided by an award; and
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Interpret
the provisions of the 2019 Plan and outstanding awards.
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The
Committee may suspend vesting, settlement, or exercise of awards pending a determination of whether a selected participant’s
service should be terminated for cause (in which case outstanding awards would be forfeited). Awards may be subject to any policy
that the board may implement on the recoupment of compensation (referred to as a “clawback” policy). The members of
the board, the Committee and their delegates shall be indemnified by us to the maximum extent permitted by applicable law for
actions taken or not taken regarding the 2019 Plan. In addition, the Committee may use the 2019 Plan to issue shares under other
plans or sub-plans as may be deemed necessary or appropriate, such as to provide for participation by non-U.S. employees and those
of any of our subsidiaries and affiliates.
Types
of Awards.
Stock
Options. A stock option is the right to acquire shares at a fixed exercise price over a fixed period of time. The Committee
will determine, among other terms and conditions, the number of shares covered by each stock option and the exercise price of
the shares subject to each stock option, but such per share exercise price cannot be less than the fair market value of a share
of our common stock on the date of grant of the stock option. The exercise price of each stock option granted under the 2019 Plan
must be paid in full at the time of exercise, either with cash, or through a broker-assisted “cashless” exercise and
sale program, or net exercise, or through another method approved by the Committee. Stock options granted under the 2019 Plan
may be either ISOs or NQSOs. In order to comply with Treasury Regulation Section 1.422-2(b), the 2019 Plan provides that no more
than 1,498,128 shares may be issued pursuant to the exercise of ISOs.
SARs.
A SAR is the right to receive, upon exercise, an amount equal to the difference between the fair market value of the shares on
the date of the SAR’s exercise and the aggregate exercise price of the shares covered by the exercised portion of the SAR.
The Committee determines the terms of SARs, including the exercise price (provided that such per share exercise price cannot be
less than the fair market value of a share of our common stock on the date of grant), the vesting and the term of the SAR. Settlement
of a SAR may be in shares of common stock or in cash, or any combination thereof, as the Committee may determine. SARs may not
be repriced or exchanged without stockholder approval.
Restricted
Stock. A restricted stock award is the grant of shares of our common stock to a selected participant and such shares may
be subject to a substantial risk of forfeiture until specific conditions or goals are met. The restricted shares may be issued
with or without cash consideration being paid by the selected participant as determined by the Committee. The Committee also will
determine any other terms and conditions of an award of restricted stock.
RSUs.
RSUs are the right to receive an amount equal to the fair market value of the shares covered by the RSU at some future date after
the grant. The Committee will determine all of the terms and conditions of an award of RSUs. Payment for vested RSUs may be in
shares of common stock or in cash, or any combination thereof, as the Committee may determine. RSUs represent an unfunded and
unsecured obligation for us, and a holder of a stock unit has no rights other than those of a general creditor.
Other
Awards. The 2019 Plan also provides that other equity awards, which derive their value from the value of our shares or
from increases in the value of our shares, may be granted. In addition, cash awards may also be issued. Substitute awards may
be issued under the 2019 Plan in assumption of or substitution for or exchange for awards previously granted by an entity which
we (or an affiliate) acquire.
Limited
Transferability of Awards. Awards granted under the 2019 Plan generally are not transferrable other than by will or by
the laws of descent and distribution. However, the Committee may in its discretion permit the transfer of awards other than ISOs.
Change
in Control. In the event that we are a party to a merger or other reorganization or similar transaction, outstanding 2019
Plan awards will be subject to the agreement pertaining to such merger or reorganization. Such agreement may provide for (i) the
continuation of the outstanding awards by us if we are a surviving corporation, (ii) the assumption or substitution of the outstanding
awards by the surviving entity or its parent, (iii) full exercisability and/or full vesting of outstanding awards, or (iv) cancellation
of outstanding awards either with or without consideration, in all cases with or without consent of the selected participant.
The Committee will decide the effect of a change in control of us on outstanding awards.
Amendment
and Termination of the 2019 Plan. The board generally may amend or terminate the 2019 Plan at any time and for any reason,
except that it must obtain stockholder approval of material amendments to the extent required by applicable laws, regulations
or rules.
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
The
following includes a summary of transactions since January 1, 2018 to which we have been a party, including transactions in which
the amount involved in the transaction exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for
the last two completed fiscal years, and in which any of our directors, executive officers or, to our knowledge, beneficial owners
of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a
direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements,
which are described elsewhere in this prospectus. We are not otherwise a party to a current related party transaction, and no
transaction is currently proposed, in which the amount of the transaction exceeds the lesser of $120,000 or 1% of the average
of our total assets at year-end for the last two completed fiscal years and in which a related person had or will have a direct
or indirect material interest.
On
October 9, 2019, Eric Rothe, a director, loaned us $15,000 which is payable on demand, is not secured, and does not incur interest,
all of which was repaid on November 20, 2020.
On
May 30, 2018 and October 2, 2019, the Kenneth and Annette Hallock Revocable Trust loaned us $100,000 and $200,000, respectively,
which is payable on demand, is not secured, and does not incur interest, of which $170,000 remains outstanding as of December
1, 2020. Kenneth Hallock, a director, is one of the Trustees of the Hallock Trust.
Between
November 2014 and August 2017, Snehal Patel, our Chief Executive Officer and director, loaned us an aggregate of $320,154, which
is payable on demand, is not secured, and does not incur interest, of which $230,154 remains outstanding as of December 1, 2020.
In addition, as of December 31, 2019, Snehal Patel is owed $4,817 for reimbursable expenses.
On
August 19, 2019, all plague vaccine assets, including our intellectual property and know-how, which as of the date of transfer
could not be developed and had zero value to us due to dormancy and termination of the plague vaccine research program in 2016,
were transferred to Snehal Patel at zero value in consideration for a 0.5% royalty payment due and payable to us on the first
year of net sales in the event the plague vaccine assets are commercialized. No additional royalties shall be due and payable
to us after the first year of net sales.
As
of September 30, 2019, related party payables to our officers and directors since January 1, 2010 totaled $12 million. As of September
30, 2019, our officers and directors owned outstanding warrants to acquire 2,565,521 shares of our common stock. On September
30, 2019, the officers and directors exchanged all related party payables and outstanding warrants for an aggregate of 7,902,603
shares of our common stock, leaving us with no related party payables and no outstanding warrants on September 30, 2019.
On
December 15, 2020, we announced we had entered into an option agreement with Westport Bio to in-license a pre-clinical coronavirus
vaccine program that is currently at the stage of pre-clinical animal testing. The option is exercisable at our discretion. In
exchange for the option, we have agreed to sponsor research with Westport Bio in an aggregate amount of up to $250,000, plus additional
license and assignment fees. The founder of Westport Bio is our Chief Executive Officer and director, Snehal Patel
Indemnification
Agreements
We
have entered into indemnification agreements with each of our directors and executive officers. These indemnification agreements
provide our directors and executive officers with contractual rights to indemnification and expense advancement that are, in some
cases, broader than the specific indemnification provisions contained under Delaware law. See “Description of Share Capital
— Indemnification of Directors and Officers” for additional information regarding indemnification under Delaware law
and our amended and restated by-laws.
Related
Person Transaction Policy
We
adopted a related person transaction policy that sets forth our procedures for the identification, review, consideration and approval
or ratification of related person transactions. For purposes of our policy only, a related person transaction is a transaction,
arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we and any related
person are, were or will be participants in which the amount involved exceeds the lesser of $120,000 or 1% of the average of our
total assets at year-end. Transactions involving compensation for services provided to us as an employee or director are not covered
by this policy. A related person is any executive officer, director or beneficial owner of more than 5% of any class of our voting
securities, including any of their immediate family members and any entity owned or controlled by such persons.
Under
the policy, if a transaction has been identified as a related person transaction, including any transaction that was not a related
person transaction when originally consummated or any transaction that was not initially identified as a related person transaction
prior to consummation, our management must present information regarding the related person transaction to our audit committee,
or, if audit committee approval would be inappropriate, to another independent body of our board of directors, for review, consideration
and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests,
direct and indirect, of the related persons, the benefits to us of the transaction and whether the transaction is on terms that
are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally.
Under the policy, we will collect information that we deem reasonably necessary from each director, executive officer and, to
the extent feasible, significant stockholder to enable us to identify any existing or potential related-person transactions and
to effectuate the terms of the policy. In addition, under our code of business conduct and ethics, our employees and directors
have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise
to a conflict of interest. In considering related person transactions, our audit committee, or other independent body of our board
of directors, will take into account the relevant available facts and circumstances including, but not limited to:
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the
risks, costs and benefits to us;
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the
impact on a director’s independence in the event that the related person is a director, immediate family member of a
director or an entity with which a director is affiliated;
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the
availability of other sources for comparable services or products; and
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the
terms available to or from, as the case may be, unrelated third parties or to or from employees generally.
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The
policy requires that, in determining whether to approve, ratify or reject a related person transaction, our audit committee, or
other independent body of our board of directors, must consider, in light of known circumstances, whether the transaction is in,
or is not inconsistent with, our best interests and those of our stockholders, as our audit committee, or other independent body
of our board of directors, determines in the good faith exercise of its discretion.
PRINCIPAL
STOCKHOLDERS
The
following table sets forth certain information regarding the beneficial ownership of our common stock as of December 1, 2020 by:
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each
of our named executive officers;
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each
of our directors;
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all
of our current directors and executive officers as a group; and
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each
stockholder known by us to own beneficially more than 5% of our common stock.
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Beneficial
ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities.
Shares of common stock that may be acquired by an individual or group within 60 days of December 1, 2020, pursuant to the exercise
of options or warrants, vesting of common stock or conversion of preferred stock or convertible debt, are deemed to be outstanding
for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person shown in the table. Percentage of ownership is based on 12,043,541
shares of common stock issued and outstanding as of December 1, 2020.
Except
as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment
power with respect to all shares of common stock shown to be beneficially owned by them, based on information provided to us by
such stockholders. Unless otherwise indicated, the address for each director and executive officer listed is: c/o Greenwich LifeSciences,
Inc., 3992 Bluebonnet Dr, Building 14, Stafford, TX 77477.
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Number
of Shares Beneficially Owned
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Percentage
of Common Stock Beneficially Owned
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Name
of Beneficial Owner
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Prior
to Offering
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Before
Offering
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After
Offering
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Directors
and Named Executive Officers
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Snehal
Patel
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7,433,846
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(1)
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61.54
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%
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58.35
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%
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F.
Joseph Daugherty
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52,423
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(2)
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*
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*
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David
McWilliams
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605,288
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(3)
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5.03
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%
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4.76
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%
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Eric
Rothe
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303,356
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(4)
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2.52
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%
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2.39
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%
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Kenneth
Hallock
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387,134
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(5)
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3.21
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%
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3.05
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%
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All
current named executive officers and directors as a group (5 persons)
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8,782,047
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72.66
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%
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68.89
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%
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*
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Represents
beneficial ownership of less than 1%.
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(1)
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Consists
of (i) 840,927 shares of common stock owned by Snehal Patel, (ii) 1,408,033 shares of common stock owned by Snehal Patel IRA,
(iii) 2,405,670 shares of common stock owned by Patel Family Trust 1, (iv) 1,320,226 shares of common stock owned by Patel
Family Trust 2, (v) 1,329,590 shares of common stock owned by Patel Family Trust 3, and (vi) 129,400 shares of common stock
owned by Kinnary Patel IRA. Excludes 345,912 shares of common stock held by Snehal Patel which vest in 19 equal monthly installments.
Snehal Patel and Kinnary Patel, the spouse of Snehal Patel, are the Trustees of the Patel Family Trust 1, Patel Family Trust
2 and Patel Family Trust 3. Snehal Patel is the Trustee of the Snehal Patel IRA. Kinnary Patel is the Trustee of the Kinnary
Patel IRA. In such capacities, Snehal Patel is deemed to hold voting and dispositive power over the securities held by such
entities.
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(2)
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Excludes
34,587 shares of common stock which vest in 19 equal monthly installments.
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(3)
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Excludes
14,813 shares of common stock which vest in 19 equal installments.
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(4)
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Excludes
9,870 shares of common stock which vest in 19 equal monthly installments.
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(5)
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Excludes
9,870 shares of common stock which vest in 19 equal monthly installments. Kenneth Hallock and Annette Hallock are the Trustees
of the Hallock Trust and in such capacities share voting and dispositive power over the securities held by such entity.
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DESCRIPTION
OF CAPITAL STOCK
General
Our
authorized capital stock will consist of 100,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares
of preferred stock, par value $0.001 per share.
As
of December 1, 2020, there were 26 record holders of our securities. As of December 1, 2020 there were 12,043,541 shares of common
stock issued and outstanding.
The
following description of our capital stock and provisions of our Amended and Restated Certificate of Incorporation and Amended
and Restated Bylaws. You should also refer to our Amended and Restated Certificate of Incorporation, a copy of which is filed
as an exhibit to the registration statement of which this prospectus is a part, and our Amended and Restated Bylaws, a copy of
which is filed as an exhibit to the registration statement of which this prospectus is a part.
Common
Stock
We
are authorized to issue up to a total of 100,000,000 shares of common stock, par value $0.001 per share. Holders of our common
stock are entitled to one vote for each share held on all matters submitted to a vote of our stockholders. Holders of our common
stock have no cumulative voting rights.
Further,
holders of our common stock have no preemptive or conversion rights or other subscription rights. Upon our liquidation, dissolution
or winding-up, holders of our common stock are entitled to share in all assets remaining after payment of all liabilities and
the liquidation preferences of any of our outstanding shares of preferred stock. Subject to preferences that may be applicable
to any outstanding shares of preferred stock, holders of our common stock are entitled to receive dividends, if any, as may be
declared from time to time by our board of directors out of our assets which are legally available. Each outstanding share of
our common stock is, and all shares of common stock to be issued in this offering when they are paid for will be, fully paid and
non-assessable.
The
holders of a majority of the shares of our capital stock, represented in person or by proxy, are necessary to constitute a quorum
for the transaction of business at any meeting. If a quorum is present, an action by stockholders entitled to vote on a matter
is approved if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, with
the exception of the election of directors, which requires a plurality of the votes cast.
Preferred
Stock
Our
board of directors has the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred
stock in one or more series and to fix the designations, powers, preferences, privileges, and relative participating, optional,
or special rights as well as the qualifications, limitations, or restrictions of the preferred stock, including dividend rights,
conversion rights, voting rights, terms of redemption, and liquidation preferences, any or all of which may be greater than the
rights of the common stock. Our board of directors, without stockholder approval, is able to issue convertible preferred stock
with voting, conversion, or other rights that could adversely affect the voting power and other rights of the holders of common
stock. Preferred stock could be issued quickly with terms calculated to delay or prevent a change of control or make removal of
management more difficult. Additionally, the issuance of preferred stock may have the effect of decreasing the market price of
our common stock, and may adversely affect the voting and other rights of the holders of common stock. At present, we have no
plans to issue any shares of preferred stock following this offering.
Options
Our
2019 Equity Incentive Plan provides for us to sell or issue shares restricted shares of common stock, or to grant incentive stock
options or nonqualified stock options, stock appreciation rights and restricted stock unit awards for the purchase of shares of
common stock, to employees, members of the board of directors and consultants. As of December 1, 2020, no options to purchase
common shares were outstanding. For additional information regarding the terms of the 2019 Plan, see “Executive and Director
Compensation — 2019 Equity Incentive Plan.”
Warrants
On
September 24, 2020, in connection with our IPO, we issued Aegis Capital Corp. a warrant to purchase up to 100,870 shares of our
common stock. The warrant is exercisable at any time and from time to time, in whole or in part, during a period commencing March
24, 2021 and expiring September 24, 2025. The warrant is exercisable for $7.1875 per share and is exercisable on a cash basis,
provided that if a registration statement registering the common stock underlying the warrant is not effective, the warrant may
be exercised on a cashless basis. If the warrant is exercised for cash within the first six months of the period in which it is
exercisable, the exercise price will be equal to $6.9718 per share.
Registration
Rights Agreement
We
have granted the former holders of our Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock registration rights pursuant to which we have agreed to, among other things, file with the SEC a registration
statement under the Securities Act that covers the resale of shares of common stock issued upon conversion of such preferred stock
(the “Conversion Shares”) and any shares of common stock issued as a dividend or other distribution with respect to,
in exchange for, or in replacement of such Conversion Shares (collectively, the “Registrable Securities”). Specifically,
holders of at least a majority of the Registrable Securities may request that we file a registration statement covering the Registrable
Securities. In addition, subject to certain exceptions, in the event we propose to register any of our securities in connection
with a public offering, the holders of Registrable Securities may request such that such Registrable Securities be included in
such registration statement. The registration rights shall terminate (i) three years after the closing date of our IPO and (ii)
as to any holder, at such time as all Registrable Securities that such holder holds or has the right to acquire may be sold in
any three month period pursuant to Rule 144 under the Securities Act.
Lock-Up
& Leak Out Agreements
Each
of our directors and executive officers and certain holders of our outstanding securities prior to our IPO have entered into a
lock-up/leak-out agreement (the “Lock-Up/Leak-Out Agreement”) with us pursuant to which such officers, directors and
stockholders have agreed that for a period of 48 months following the completion of our IPO they shall not transfer, sell, contract
to sell, devise, gift, assign, pledge, hypothecate, distribute or grant any option to purchase or otherwise dispose of, directly
or indirectly, any of their shares subject to the Lock-Up/Leak-Out Agreement; provided, however, our board of directors may, in
its sole discretion, amend the terms of the Lock-Up/Leak-Out Agreement.
Exclusive
Forum
Our
Amended and Restated Bylaws provides that unless we consent in writing to the selection of an alternative forum, the State of
Delaware is the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of us, (ii) any action
asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of our Company to us or our stockholders,
(iii) any action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL
or our Amended and Restated Certificate of Incorporation or our Amended and Restated Bylaws, or (iv) any action asserting a claim
against us, our directors, officers, employees or agents governed by the internal affairs doctrine, except for, as to each of
(i) through (iv) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject
to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the
Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum
other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction.
Additionally,
our Amended and Restated Bylaws provide that unless we consent in writing to the selection of an alternative forum, the federal
district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause
of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in shares of our
capital stock are deemed to have notice of and consented to this provision.
Anti-Takeover
Provisions of Delaware Law, our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws
Delaware
Law
We
are governed by the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly
traded Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years
after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved
in a prescribed manner. A business combination includes mergers, asset sales or other transactions resulting in a financial benefit
to the stockholder. An interested stockholder is a person who, together with affiliates and associates, owns (or within three
years, did own) 15% or more of the corporation’s voting stock, subject to certain exceptions. The statute could have the
effect of delaying, deferring or preventing a change in control of our Company.
Board
of Directors Vacancies
Our
Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws authorize only our board of directors to fill
vacant directorships. In addition, the number of directors constituting our board of directors may be set only by resolution of
the majority of the incumbent directors.
Stockholder
Action; Special Meeting of Stockholders
Our
Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws provide that our stockholders may not take action
by written consent. Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws further provide that
special meetings of our stockholders may be called by a majority of the board of directors, the Chief Executive Officer, or the
Chairman of the board of directors.
Advance
Notice Requirements for Stockholder Proposals and Director Nominations
Our
Amended and Restated Bylaws provide that stockholders seeking to bring business before our annual meeting of stockholders, or
to nominate candidates for election as directors at our annual meeting of stockholders, must provide timely notice of their intent
in writing. To be timely, a stockholder’s notice must be delivered to the secretary at our principal executive offices not
later than the close of business on the 90th day nor earlier than the close of business on the 120th day
prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event the date of
the annual meeting is more than 30 days before or more than 60 days after such anniversary date, or if no annual meeting was held
in the preceding year, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the
120th day prior to such annual meeting and not later than the close of business on the later of the 90th
day prior to such annual meeting or the 10th day following the day on which a public announcement of the date of such
meeting is first made by us. These provisions may preclude our stockholders from bringing matters before our annual meeting of
stockholders or from making nominations for directors at our annual meeting of stockholders.
Authorized
but Unissued Shares
Our
authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval
and may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate
acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock
could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger
or otherwise. If we issue such shares without stockholder approval and in violation of limitations imposed by The Nasdaq Capital
Market, our stock could be delisted.
Transfer
Agent and Registrar
The
transfer agent and registrar for our common stock is Philadelphia Stock Transfer, Inc.
Listing
Our
common stock is listed on The Nasdaq Capital Market under the symbol “GLSI.”
MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR COMMON STOCK
The
following is a summary of the material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the ownership
and disposition of our common stock but does not purport to be a complete analysis of all the potential tax considerations relating
thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (“Internal Revenue Code”).
Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities
may be changed, possibly retroactively, so as to result in U.S. federal income tax consequences different from those set forth
below. No ruling on the U.S. federal, state, or local tax considerations relevant to our operations or to the purchase, ownership
or disposition of our shares, has been requested from the IRS or other tax authority. No assurance can be given that the IRS would
not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.
This
summary also does not address the tax considerations arising under the laws of any non-U.S., state or local jurisdiction, or under
U.S. federal gift and estate tax laws, except to the limited extent set forth below. In addition, this discussion does not address
tax considerations applicable to an investor’s particular circumstances or to investors that may be subject to special tax
rules, including, without limitation:
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banks,
insurance companies or other financial institutions, regulated investment companies or real estate investment trusts;
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persons
subject to the alternative minimum tax or Medicare contribution tax on net investment income;
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tax-exempt
organizations or governmental organizations;
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controlled
foreign corporations, passive foreign investment companies and corporations that accumulate earnings to avoid U.S. federal
income tax;
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brokers
or dealers in securities or currencies;
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traders
in securities that elect to use a mark-to-market method of accounting for their securities holdings;
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persons
that own, or are deemed to own, more than five percent of our capital stock (except to the extent specifically set forth below);
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U.S.
expatriates and certain former citizens or long-term residents of the U.S.;
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partnerships
or entities classified as partnerships for U.S. federal income tax purposes or other pass-through entities (and investors
therein);
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persons
who hold our common stock as a position in a hedging transaction, “straddle,” “conversion transaction”
or other risk reduction transaction or integrated investment;
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persons
who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation;
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persons
who do not hold our common stock as a capital asset within the meaning of Section 1221 of the Internal Revenue Code; or
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persons
deemed to sell our common stock under the constructive sale provisions of the Internal Revenue Code.
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You
are urged to consult your tax advisor with respect to the application of the U.S. federal income tax laws to your particular situation,
as well as any tax consequences of the purchase, ownership and disposition of our common stock arising under the U.S. federal
estate or gift tax rules or under the laws of any state, local, non-U.S., or other taxing jurisdiction or under any applicable
tax treaty.
Non-U.S.
Holder Defined
For
purposes of this discussion, you are a non-U.S. holder (other than a partnership) if you are any holder other than:
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an
individual citizen or resident of the U.S. (for U.S. federal income tax purposes);
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a
corporation or other entity taxable as a corporation created or organized in the U.S. or under the laws of the U.S., any state
thereof, or the District of Columbia, or other entity treated as such for U.S. federal income tax purposes;
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an
estate whose income is subject to U.S. federal income tax regardless of its source; or
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a
trust (x) whose administration is subject to the primary supervision of a U.S. court and which has one or more “U.S.
persons” (within the meaning of Section 7701(a)(30) of the Internal Revenue Code) who have the authority to control
all substantial decisions of the trust or (y) which has made a valid election to be treated as a U.S. person.
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In
addition, if a partnership or entity classified as a partnership for U.S. federal income tax purposes holds our common stock,
the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership.
Accordingly, partnerships that hold our common stock, and partners in such partnerships, should consult their tax advisors.
Distributions
As
described in “Dividend Policy,” we have never declared or paid cash dividends on our common stock and do not anticipate
paying any dividends on our common stock in the foreseeable future. However, if we do make distributions on our common stock,
those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and
profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and
our accumulated earnings and profits, they will constitute a return of capital and will first reduce your basis in our common
stock, but not below zero, and then will be treated as gain from the sale of stock as described below under “— Gain
on Disposition of Common Stock.”
Subject
to the discussion below on effectively connected income, backup withholding and foreign accounts, any dividend paid to you generally
will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may
be specified by an applicable income tax treaty. In order to receive a reduced treaty rate, you must provide us with an IRS Form
W-8BEN, IRS Form W-8BEN-E or other appropriate version of IRS Form W-8 certifying qualification for the reduced rate. A non-U.S.
holder of shares of our common stock eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may
obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. If the non-U.S.
holder holds the stock through a financial institution or other agent acting on the non-U.S. holder’s behalf, the non-U.S.
holder will be required to provide appropriate documentation to the agent, which then will be required to provide certification
to us or our paying agent, either directly or through other intermediaries.
Dividends
received by you that are effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable
income tax treaty, attributable to a permanent establishment maintained by you in the U.S.) are generally exempt from such withholding
tax. In order to obtain this exemption, you must provide us with an IRS Form W-8ECI or other applicable IRS Form W-8 properly
certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same
graduated rates applicable to U.S. persons, net of certain deductions and credits. In addition, if you are a corporate non-U.S.
holder, dividends you receive that are effectively connected with your conduct of a U.S. trade or business may also be subject
to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. You should
consult your tax advisor regarding any applicable tax treaties that may provide for different rules.
Gain
on Disposition of Common Stock
Subject
to the discussion below regarding backup withholding and foreign accounts, you generally will not be required to pay U.S. federal
income tax on any gain realized upon the sale or other disposition of our common stock unless:
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the
gain is effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable income tax
treaty, the gain is attributable to a permanent establishment maintained by you in the U.S.);
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you
are a non-resident alien individual who is present in the U.S. for a period or periods aggregating 183 days or more during
the taxable year in which the sale or disposition occurs and certain other conditions are met; or
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our
common stock constitutes a U.S. real property interest by reason of our status as a “U.S. real property holding corporation,”
or USRPHC, for U.S. federal income tax purposes at any time within the shorter of (i) the five-year period preceding your
disposition of our common stock, or (ii) your holding period for our common stock.
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We
believe that we are not currently and will not become a USRPHC for U.S. federal income tax purposes, and the remainder of this
discussion so assumes. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S.
real property relative to the fair market value of our other business assets, there can be no assurance that we will not become
a USRPHC in the future. Even if we become a USRPHC, however, as long as our common stock is regularly traded on an established
securities market, such common stock will be treated as U.S. real property interests only if you actually or constructively hold
more than five percent of such regularly traded common stock at any time during the shorter of the five-year period preceding
your disposition of, or your holding period for, our common stock.
If
you are a non-U.S. holder described in the first bullet above, you will be required to pay tax on the net gain derived from the
sale under regular graduated U.S. federal income tax rates, and a corporate non-U.S. holder described in the first bullet above
also may be subject to the branch profits tax at a 30% rate, or such lower rate as may be specified by an applicable income tax
treaty. If you are an individual non-U.S. holder described in the second bullet above, you will be required to pay a flat 30%
tax (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale, which gain may be offset
by U.S. source capital losses for the year (provided you have timely filed U.S. federal income tax returns with respect to such
losses). You should consult any applicable income tax or other treaties that may provide for different rules.
Federal
Estate Tax
Our
common stock beneficially owned by an individual who is not a citizen or resident of the U.S. (as defined for U.S. federal estate
tax purposes) at the time of their death will generally be includable in the decedent’s gross estate for U.S. federal estate
tax purposes, unless an applicable estate tax treaty provides otherwise. The test for whether an individual is a resident of the
U.S. for U.S. federal estate tax purposes differs from the test used for U.S. federal income tax purposes. Some individuals, therefore,
may be non-U.S. holders for U.S. federal income tax purposes, but not for U.S. federal estate tax purposes, and vice versa.
Backup
Withholding and Information Reporting
Generally,
we must report annually to the IRS the amount of dividends paid to you, your name and address and the amount of tax withheld,
if any. A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make
these reports available to tax authorities in your country of residence.
Payments
of dividends or of proceeds on the disposition of stock made to you may be subject to information reporting and backup withholding
at a current rate of 28% unless you establish an exemption, for example, by properly certifying your non-U.S. status on an IRS
Form W-8BEN, IRS Form W-8BEN-E or another appropriate version of IRS Form W-8.
Backup
withholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally
be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.
Foreign
Account Tax Compliance
The
Foreign Account Tax Compliance Act, or FATCA, imposes withholding tax at a rate of 30% on dividends on and gross proceeds from
the sale or other disposition of our common stock paid to “foreign financial institutions” (as specially defined under
these rules), unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to
collect and provide to the U.S. tax authorities substantial information regarding the U.S. account holders of such institution
(which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities
with U.S. owners) or otherwise establishes an exemption. FATCA also generally imposes a U.S. federal withholding tax of 30% on
dividends on and gross proceeds from the sale or other disposition of our common stock paid to a “non-financial foreign
entity” (as specially defined for purposes of these rules) unless such entity provides the withholding agent with a certification
identifying certain substantial direct and indirect U.S. owners of the entity, certifies that there are none or otherwise establishes
an exemption. The withholding provisions under FATCA generally apply to dividends on our common stock, and under current transition
rules, are expected to apply with respect to the gross proceeds from the sale or other disposition of our common stock on or after
January 1, 2019. An intergovernmental agreement between the U.S. and an applicable foreign country may modify the requirements
described in this paragraph. Non-U.S. holders should consult their tax advisors regarding the possible implications of this legislation
on their investment in our common stock.
Each
prospective investor should consult its tax advisor regarding the particular U.S. federal, state and local and non-U.S. tax consequences
of purchasing, holding and disposing of our common stock, including the consequences of any proposed change in applicable laws.
UNDERWRITING
Aegis
Capital Corp. (“Aegis”) is acting as the representative of the underwriters and the book-running manager of this offering.
Under the terms of an underwriting agreement, which is filed as an exhibit to the registration statement, each of the underwriters
named below has severally agreed to purchase from us the respective number of shares of common stock shown opposite its name below:
Underwriters
|
|
Number
of
Shares
|
|
Aegis
Capital Corp.
|
|
|
660,000
|
|
|
|
|
|
|
|
|
|
660,000
|
|
The
underwriting agreement provides that the underwriters’ obligation to purchase shares of common stock depends on the satisfaction
of the conditions contained in the underwriting agreement including:
|
●
|
the
representations and warranties made by us to the underwriters are true;
|
|
|
|
|
●
|
there
is no material change in our business or the financial markets; and
|
|
|
|
|
●
|
we
deliver customary closing documents to the underwriters.
|
Commissions
and Expenses
The
following table shows the public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes
either no exercise or full exercise by the underwriters of their over-allotment option.
|
|
Per
Share
|
|
|
Total
with no Over-Allotment
|
|
|
Total
with
Over-Allotment
|
|
Public
offering price
|
|
$
|
40.00
|
|
|
$
|
26,400,000
|
|
|
$
|
30,360,000
|
|
Underwriting
discount (8%)
|
|
$
|
3.20
|
|
|
$
|
2,112,000
|
|
|
$
|
2,428,800
|
|
Non-accountable
expense allowance (1%)(1)
|
|
$
|
0.40
|
|
|
$
|
264,000
|
|
|
$
|
303,600
|
|
Proceeds,
before expenses, to us
|
|
$
|
36.40
|
|
|
$
|
24,024,000
|
|
|
$
|
27,627,600
|
|
(1)
|
We
have agreed to pay a non-accountable expense allowance to the representative equal to 1.0% of the gross proceeds received
in this offering.
|
We
have paid an advance of $25,000 to the representative, which will be applied against actual out-of-pocket accountable expenses
and reimbursed to us to the extent any portion thereof is not actually incurred in compliance with FINRA Rule 5110(f)(2)(C).
The
representative has advised us that the underwriters propose to offer the shares of common stock directly to the public at the
public offering price on the cover of this prospectus and to selected dealers, which may include the underwriters, at such offering
price less a selling concession not in excess of $1.60 per share. After the offering, the representatives may change the
offering price and other selling terms.
The
expenses of this offering that are payable by us are estimated to be approximately $134,556 (excluding estimated underwriting
discounts and commissions). We have also agreed to reimburse the underwriters for certain of their expenses, in an amount up to
$65,000, including for road show, diligence, and reasonable legal fees, as set forth in the underwriting agreement.
Option
to Purchase Additional Shares
We
have granted the underwriters an option exercisable for 45 days after the date of this prospectus, to purchase, from time to time,
in whole or in part, up to an aggregate of 99,000 shares from us at the public
offering price less underwriting discounts and commissions. To the extent that this option is exercised, each underwriter will
be obligated, subject to certain conditions, to purchase its pro rata portion of these additional shares based on the underwriter’s
percentage underwriting commitment in this offering as indicated in the table at the beginning of this Underwriting Section.
Lock-Up
Agreements
We,
all of our directors, executive officers and certain stockholders have agreed that, for a period of 180 days after the
date of this prospectus subject to certain limited exceptions, we and they will not directly or indirectly, without the
prior written consent of Aegis, (i) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device
that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares
of common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by us or them
in accordance with the rules and regulations of the SEC and shares of common stock that may be issued upon exercise of any options
or warrants) or securities convertible into or exercisable or exchangeable for common stock, (ii) enter into any swap or other
derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of
shares of common stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of common
stock or other securities, in cash or otherwise, (iii) make any demand for or exercise any right or file or cause to be filed
a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or
securities convertible into or exercisable or exchangeable for common stock or any of our other securities, or (iv) publicly disclose
the intention to do any of the foregoing.
Aegis,
in its sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in
whole or in part at any time. When determining whether or not to release common stock and other securities from lock-up agreements,
Aegis will consider, among other factors, the holder’s reasons for requesting the release, the number of shares of common
stock and other securities for which the release is being requested and market conditions at the time.
Offering
Price Determination
The
public offering price was negotiated between the representative and us. In determining the public offering price of our common
stock, the representative considered:
|
●
|
the
history and prospects for the industry in which we compete;
|
|
|
|
|
●
|
our
financial information;
|
|
|
|
|
●
|
the
ability of our management and our business potential and earning prospects;
|
|
|
|
|
●
|
the
prevailing securities markets at the time of this offering; and
|
|
|
|
|
●
|
the
recent market prices of, and the demand for, publicly traded shares of generally comparable companies.
|
Indemnification
We
have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to
contribute to payments that the underwriters may be required to make for these liabilities.
Stabilization,
Short Positions and Penalty Bids
The
representatives may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and
penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with
Regulation M under the Exchange Act:
|
●
|
Stabilizing
transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
|
|
|
|
|
●
|
A
short position involves a sale by the underwriters of shares in excess of the number of shares the underwriters are obligated
to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short
position or a naked short position. In a covered short position, the number of shares involved in the sales made by the underwriters
in excess of the number of shares they are obligated to purchase is not greater than the number of shares that they may purchase
by exercising their option to purchase additional shares. In a naked short position, the number of shares involved is greater
than the number of shares in their option to purchase additional shares. The underwriters may close out any short position
by either exercising their option to purchase additional shares and/or purchasing shares in the open market. In determining
the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares
available for purchase in the open market as compared to the price at which they may purchase shares through their option
to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that
there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors
who purchase in the offering.
|
|
|
|
|
●
|
Syndicate
covering transactions involve purchases of the common stock in the open market after the distribution has been completed in
order to cover syndicate short positions.
|
|
|
|
|
●
|
Penalty
bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold
by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.
|
These
stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market
price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price
of the common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected
on The Nasdaq Capital Market or otherwise and, if commenced, may be discontinued at any time.
Neither
we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither we nor any of the underwriters make any representation
that the representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued
without notice.
Electronic
Distribution
A
prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one
or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases,
prospective investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective
investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for
sale to online brokerage account holders. Any such allocation for online distributions will be made by the representatives on
the same basis as other allocations.
Other
than the prospectus in electronic format, the information on any underwriter’s or selling group member’s web site
and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus
or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter
or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.
Listing
Our
common stock is listed on The Nasdaq Capital Market under the symbol “GLSI.”
Discretionary
Sales
The
underwriters have informed us that they do not expect to sell more than 5% of the common stock in the aggregate to accounts
over which they exercise discretionary authority.
Other
Relationships
Certain
of the underwriters and their affiliates may in the future provide various investment banking, commercial banking and other financial
services for us and our affiliates for which they may in the future receive customary fees.
In
particular, in connection with our IPO, on September 24, 2020, we entered into an underwriting agreement with Aegis pursuant to
which we paid Aegis an aggregate of $752,500.23 in commissions and non-accountable expenses. In addition, we issued Aegis warrants
to purchase 100,870 shares of our common stock at an exercise price of $7.1875 per share, or $6.9718 if exercised
for cash prior to September 21, 2021.
Offer
restrictions outside the United States
Other
than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities
offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus
may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in
connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances
that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons who come into possession
of this prospectus are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution
of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered
by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
LEGAL
MATTERS
The
validity of the issuance of the common stock offered by us in this offering will be passed upon for us by Sheppard, Mullin, Richter
& Hampton LLP, New York, New York. Certain legal matters in connection with this offering will be passed upon for the underwriters
by Sichenzia Ross Ference LLP, New York, New York.
EXPERTS
The
financial statements of Greenwich LifeSciences, Inc. as of December 31, 2019 and 2018 and for each of the years then ended included
in this Registration Statement, of which this prospectus forms a part, have been so included in reliance on the report of MaloneBailey,
LLP, an independent registered public accounting firm (the report on the financial statements contains an explanatory paragraph
regarding the Company’s ability to continue as a going concern) appearing elsewhere herein, given on the authority of said
firm as experts in auditing and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect
to the common stock offered by this prospectus. This prospectus, which is part of the registration statement, omits certain information,
exhibits, schedules and undertakings set forth in the registration statement. For further information pertaining to us and our
common stock, reference is made to the registration statement and the exhibits and schedules to the registration statement. Statements
contained in this prospectus as to the contents or provisions of any documents referred to in this prospectus are not necessarily
complete, and in each instance where a copy of the document has been filed as an exhibit to the registration statement, reference
is made to the exhibit for a more complete description of the matters involved.
The
registration statement is available at the Securities and Exchange Commission’s website at www.sec.gov. The registration
statement, including all exhibits and amendments to the registration statement, has been filed electronically with the Securities
and Exchange Commission.
We
are subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, as amended, and, accordingly,
are required to file annual reports containing financial statements audited by an independent public accounting firm, quarterly
reports containing unaudited financial data, current reports, proxy statements and other information with the Securities and Exchange
Commission. You are able to inspect and copy such periodic reports, proxy statements and other information at the website of the
Securities and Exchange Commission referred to above.
GREENWICH
LIFESCIENCES, INC.
INDEX
TO FINANCIAL STATEMENTS
|
Page
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Balance
Sheets as of December 31, 2019 and 2018
|
F-3
|
Statements
of Operations for the Years Ended December 31, 2019 and 2018
|
F-4
|
Statements
of Stockholders’ Deficit for the Years Ended December 31, 2019 and 2018
|
F-5
|
Statements
of Cash Flows for the Years Ended December 31, 2019 and 2018
|
F-6
|
Notes
to Financial Statements for the Years Ended December 31, 2019 and 2018
|
F-7
|
|
|
Balance
Sheets as of September 30, 2020 (Unaudited) and December 31, 2019
|
F-14
|
Statements
of Operations for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
|
F-15
|
Statements
of Stockholders’ Equity (Deficit) for the Nine Months Ended September 30, 2020 and 2019 (Unaudited)
|
F-16
|
Statements
of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (Unaudited)
|
F-17
|
Notes
to Financial Statements (Unaudited)
|
F-18
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and Board of Directors of Greenwich LifeSciences, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of Greenwich LifeSciences, Inc. (the “Company”) as of December 31, 2019
and 2018, and the related statements of operations, stockholders’ deficit, and cash flows for the years then ended, and
the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results
of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in
the United States of America.
Going
Concern Matter
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency
that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters
are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/s/
MaloneBailey, LLP
|
|
www.malonebailey.com
|
|
We
have served as the Company’s auditor since 2019.
|
|
Houston,
Texas
|
|
April
2, 2020, except for Note 8, which is dated June 22, 2020
|
|
GREENWICH
LIFESCIENCES, INC.
BALANCE
SHEETS
AS
OF DECEMBER 31, 2019 AND 2018
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
6,835
|
|
|
$
|
85,102
|
|
Total
current assets
|
|
|
6,835
|
|
|
|
85,102
|
|
Acquired
patents, net
|
|
|
19,836
|
|
|
|
23,443
|
|
Total
assets
|
|
$
|
26,671
|
|
|
$
|
108,545
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders’ deficit
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable & accrued interest
|
|
$
|
730,309
|
|
|
$
|
277,556
|
|
Unreimbursed
expenses
|
|
|
11,626
|
|
|
|
30,889
|
|
Advance
from related party/shareholder
|
|
|
635,154
|
|
|
|
420,154
|
|
Total
current liabilities
|
|
|
1,377,089
|
|
|
|
728,599
|
|
Related
party payable
|
|
|
—
|
|
|
|
9,500,000
|
|
Total
liabilities
|
|
|
1,377,089
|
|
|
|
10,228,599
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value; 100,000,000 shares authorized; 8,458,048 and 202,996 shares issued and outstanding as of December
31, 2019 and 2018, respectively
|
|
|
8,458
|
|
|
|
203
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value; 6,795,000 shares authorized;
|
|
|
|
|
|
|
|
|
Series
A preferred stock: 1,520,937 issued and outstanding as of December 31, 2019 and 2018
|
|
|
1,521
|
|
|
|
1,521
|
|
Series
B preferred stock: 129,267 issued and outstanding as of December 31, 2019 and 2018
|
|
|
129
|
|
|
|
129
|
|
Series
C preferred stock: 66,575 issued and outstanding as of December 31, 2019 and 2018
|
|
|
67
|
|
|
|
67
|
|
Series
D preferred stock: 263,586 issued and outstanding as of December 31, 2019 and 2018, respectively
|
|
|
264
|
|
|
|
264
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
25,853,134
|
|
|
|
13,666,446
|
|
Accumulated
deficit
|
|
|
(27,213,991
|
)
|
|
|
(23,788,684
|
)
|
Total
stockholders’ deficit
|
|
|
(1,350,418
|
)
|
|
|
(10,120,054
|
)
|
Total
liabilities and stockholders’ deficit
|
|
$
|
26,671
|
|
|
$
|
108,545
|
|
See
accompanied notes to financial statements.
GREENWICH
LIFESCIENCES, INC.
STATEMENTS
OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
|
|
Year
Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Revenue
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
2,606,420
|
|
|
|
1,270,016
|
|
General
and administrative
|
|
|
818,887
|
|
|
|
419,639
|
|
Total
operating expenses
|
|
|
3,425,307
|
|
|
|
1,689,655
|
|
Loss
from operations
|
|
|
(3,425,307
|
)
|
|
|
(1,689,655
|
)
|
Net
loss
|
|
$
|
(3,425,307
|
)
|
|
$
|
(1,689,655
|
)
|
Per share
information:
|
|
|
|
|
|
|
|
|
Net
loss per common share, basic and diluted
|
|
$
|
(1.52
|
)
|
|
$
|
(8.32
|
)
|
Weighted
average common shares outstanding, basic and diluted
|
|
|
2,257,979
|
|
|
|
202,996
|
|
See
accompanied notes to financial statements.
GREENWICH
LIFESCIENCES, INC.
STATEMENTS
OF STOCKHOLDERS’ DEFICIT
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
|
|
Common
Stock
|
|
|
Preferred
Stock
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Shares
|
|
|
Par
Amount
|
|
|
Shares
|
|
|
Par
Amount
|
|
|
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Stockholders’
Deficit
|
|
Balances,
December 31, 2017
|
|
|
202,996
|
|
|
$
|
203
|
|
|
|
1,961,638
|
|
|
$
|
1,962
|
|
|
$
|
13,566,465
|
|
|
$
|
(22,099,029
|
)
|
|
$
|
(8,530,399
|
)
|
Preferred
Stock Sold
|
|
|
—
|
|
|
|
—
|
|
|
|
18,727
|
|
|
|
19
|
|
|
|
99,981
|
|
|
|
—
|
|
|
|
100,000
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,689,655
|
)
|
|
|
(1,689,655
|
)
|
Balances,
December 31, 2018
|
|
|
202,996
|
|
|
|
203
|
|
|
|
1,980,365
|
|
|
|
1,981
|
|
|
|
13,666,446
|
|
|
|
(23,788,684
|
)
|
|
|
(10,120,054
|
)
|
Exchange
of related party payables and warrants for common stock
|
|
|
8,012,684
|
|
|
|
8,013
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,991,987
|
|
|
|
—
|
|
|
|
12,000,000
|
|
Stock-based
compensation
|
|
|
242,368
|
|
|
|
242
|
|
|
|
—
|
|
|
|
—
|
|
|
|
194,701
|
|
|
|
—
|
|
|
|
194,943
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,425,307
|
)
|
|
|
(3,425,307
|
)
|
Balances,
December 31, 2019
|
|
|
8,458,048
|
|
|
$
|
8,458
|
|
|
|
1,980,365
|
|
|
$
|
1,981
|
|
|
$
|
25,853,134
|
|
|
$
|
(27,213,991
|
)
|
|
$
|
(1,350,418
|
)
|
See
accompanied notes to financial statements.
GREENWICH
LIFESCIENCES, INC.
STATEMENTS
OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018
|
|
Year
Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Operating
activities:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,425,307
|
)
|
|
$
|
(1,689,655
|
)
|
Adjustments
required to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
3,607
|
|
|
|
3,607
|
|
Stock-based
compensation
|
|
|
194,943
|
|
|
|
—
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
393,402
|
|
|
|
80,967
|
|
Accrued
interest
|
|
|
59,353
|
|
|
|
35,442
|
|
Unreimbursed
expenses (accrued)
|
|
|
(19,263
|
)
|
|
|
(45,313
|
)
|
Related
party payable
|
|
|
2,500,000
|
|
|
|
1,500,000
|
|
Net
cash used in operating activities
|
|
|
(293,267
|
)
|
|
|
(114,952
|
)
|
Investing
activities:
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
|
Proceeds/repurchase
of preferred stock
|
|
|
—
|
|
|
|
100,000
|
|
Advance
from related party/shareholder
|
|
|
215,000
|
|
|
|
100,000
|
|
Net
cash provided by (used in) financing activities
|
|
|
215,000
|
|
|
|
200,000
|
|
Net
increase (decrease) in cash
|
|
|
(78,267
|
)
|
|
|
85,048
|
|
Cash,
beginning of period
|
|
|
85,102
|
|
|
|
54
|
|
Cash,
end of period
|
|
$
|
6,835
|
|
|
$
|
85,102
|
|
|
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Common
stock to settle related party payable
|
|
|
12,000,000
|
|
|
|
|
|
See
accompanied notes to financial statements.
GREENWICH
LIFESCIENCES, INC.
NOTES
TO FINANCIAL STATEMENTS
1.
Organization and Description of the Business
Greenwich
LifeSciences, Inc. (the “Company”) was incorporated in the state of Delaware in 2006 under the name Norwell, Inc.
In March 2018, Norwell, Inc. changed its name to Greenwich LifeSciences, Inc. The Company is developing a breast cancer immunotherapy
focused on preventing the recurrence of breast cancer following surgery.
2.
Going Concern
The
Company has prepared its financial statements on a going concern basis, which assumes that the Company will realize its assets
and satisfy its liabilities in the normal course of business. However, the Company has incurred net losses since its inception
and has negative operating cash flows. These circumstances raise substantial doubt about the Company’s ability to continue
as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the
outcome of the uncertainty concerning the Company’s ability to continue as a going concern.
As
of December 31, 2019, the Company had cash of $6,835. For the foreseeable future, the Company’s ability to continue its
operations is dependent upon its ability to obtain additional capital.
3.
Significant Accounting Policies
Basis
of Presentation
The
accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States
of America (“GAAP”) and pursuant to the rules and regulations of US Securities and Exchange Commission (“SEC”).
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the amounts reported in its financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates
and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management
believes to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty
and, as such, actual results may differ from management’s estimates.
Cash
Cash
consists primarily of deposits with commercial banks and financial institutions.
Impairment
of Long-Lived Assets
The
Company reviews long-lived assets for impairment when events or changes in circumstances indicate the carrying value of the assets
may not be recoverable. Recoverability is measured by comparison of the book values of the assets to future net undiscounted cash
flows that the assets or the asset groups are expected to generate. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the book value of the assets exceed their fair value, which is measured based
on the estimated discounted future net cash flows arising from the assets or asset groups. No impairment losses on long-lived
assets have been recorded through December 31, 2019.
Stock-Based
Compensation
Compensation
expense related to warrants and stock granted to employees and non-employees is measured at the grant date based on the estimated
fair value of the award and is recognized on a straight-line basis over the requisite service period. Forfeitures are recognized
as a reduction of stock-based compensation expense as they occur. Stock-based compensation expense for an award with a performance
condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such
performance condition is not determined to be probable or is not met, no compensation expense is recognized and any previously
recognized compensation expense is reversed.
GREENWICH
LIFESCIENCES, INC.
NOTES
TO FINANCIAL STATEMENTS
3.
Significant Accounting Policies (cont.)
Research
and Development Costs
Research
and development expenses are charged to operations as incurred. Research and development expenses include, among other things,
salaries, costs of outside collaborators and outside services, and supplies.
Income
Taxes
The
Company’s income tax returns are based on calculations and assumptions that are subject to examination by the Internal Revenue
Service and other tax authorities. In addition, the calculation of tax liabilities involves dealing with uncertainties in the
application of complex tax regulations.
Basic
and Diluted Loss per Share
The
Company computes loss per share in accordance with Accounting Standards Codification (“ASC”) 260 — Earnings
per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statements
of operations. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average
number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock method and convertible notes payable using the if-converted method.
Diluted EPS excludes all dilutive potential shares if their effect is antidilutive. During periods of net loss, all common stock
equivalents are excluded from the diluted EPS calculation because they are antidilutive.
As
of December 31, 2019 and 2018, the Company has 1,520,937 shares of the Company’s common stock issuable upon conversion of
the Company’s Series A Preferred Stock, 129,267 shares of the Company’s common stock issuable upon conversion of the
Company’s Series B Preferred Stock, 66,575 shares of the Company’s common stock issuable upon conversion of the Company’s
Series C Preferred Stock, and 263,586 shares of the Company’s common stock issuable upon conversion of the Company’s
Series D Preferred Stock.
As
of December 31, 2019 the company has no warrants and as of December 31, 2018, the Company has common stock equivalents related
to warrants outstanding to acquire 2,675,602 shares of the Company’s common stock.
Recent
Accounting Pronouncements
The
Company has evaluated the following recent accounting pronouncements through the date the financial statements were issued and
filed with the SEC and believes that none of them will have a material effect on the Company’s financial statements:
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2016-02, “Leases: Topic 842 (ASU 2016-02)”, to supersede nearly all existing lease guidance under GAAP. The guidance
would require lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets.
ASU 2016-02 is effective for the Company in the first quarter of its fiscal year ending December 31, 2019 using a modified retrospective
approach with the option to elect certain practical expedients. The Company has no leases, thus the adoption of ASU 2016-02 will
have no material impact on the Company’s financial statements.
In
May 2016, the FASB issued ASU 2016-12, Revenue from Contracts from Customers (Topic 606): Narrow-Scope Improvements and Practical
Expedients. The amendments in this update affect the guidance in ASU 2014-09. The core principle of the guidance in Topic 606
is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments
in ASU 2016-12 do not change the core principle of the guidance in Topic 606, but instead affect only the narrow aspects noted
in Topic 606. Topic 606 became effective for the Company on December 1, 2018. The Company has no revenue, thus the adoption of
ASU 2016-12 will have no material impact on the Company’s financial statements.
GREENWICH
LIFESCIENCES, INC.
NOTES
TO FINANCIAL STATEMENTS
3.
Significant Accounting Policies (cont.)
In
May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting. The amendments
in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity
to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods,
and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption
in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been
issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance.
The Company has elected early adoption of ASU 2017-09 to conform the accounting for share-based compensation to employees and
nonemployees.
In
July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480),
Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked
financial instruments (or embedded features) with down round features. When determining whether certain financial instruments
should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when
assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements
for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option)
no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature.
For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS)
in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as
a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion
options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features
(in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments
in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as
pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business
entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years
beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is
permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period,
any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company evaluated
ASU 2017-11 and determined that the adoption of this new accounting standard did not have a material impact on the Company’s
financial statements.
In
June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting,” which modifies the accounting for share-based payment awards issued to nonemployees to largely align
it with the accounting for share-based payment awards issued to employees. ASU 2018-07 is effective for us for annual periods
beginning January 1, 2019. The Company evaluated ASU 2018-07 and determined that the adoption of this new accounting standard
did not have a material impact on the Company’s financial statements.
4.
Related Party Transactions
Unreimbursed
expenses have been accrued and incurred by management, which total $11,626 as of December 31, 2019 and $30,889 as of December
31, 2018. In October 2019, the Kenneth Hallock and Annette Hallock Revocable Trust loaned $200,000 to the Company and Eric Rothe,
a director of the Company, loaned $15,000 to the Company, both of which are payable on demand, are not secured, and do not incur
interest. Kenneth Hallock, a director of the Company, is one of the Trustees of the Hallock Trust. In 2018, the Kenneth Hallock
and Annette Hallock Revocable Trust loaned $100,000 to the Company that is payable on demand, not secured, and does not incur
interest. In total, Snehal Patel, Company’s Chief Executive Officer and director, Eric Rothe, and the Kenneth Hallock and
Annette Hallock Revocable Trust have loaned capital to the Company that is payable on demand, is not secured, and does not incur
interest, which in the aggregate totals $635,154 as of December 31, 2019 and $420,154 as of December 31, 2018.
GREENWICH
LIFESCIENCES, INC.
NOTES
TO FINANCIAL STATEMENTS
4.
Related Party Transactions (cont.)
Related
party payables to the Company’s officers and directors since January 1, 2010 total $12.0 million as of September 30, 2019
and $9.5 million as of December 31, 2018. Related party payables were decreased from $12.0 million to $0 and all of the Company’s
2,675,602 warrants were cancelled on September 30, 2019, as all related party payables and all warrants were exchanged for an
aggregate of 8,012,684 shares of the Company’s common stock on September 30, 2019.
5.
Income Taxes
Significant
components of the Company’s deferred tax assets and liabilities were as follows:
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
|
790,333
|
|
|
|
596,018
|
|
Valuation
allowance
|
|
|
(790,333
|
)
|
|
|
(596,018
|
)
|
Total
deferred tax assets
|
|
|
—
|
|
|
|
—
|
|
The
federal income tax rate used for 2019 and 2018 was 21%. At December 31, 2019, the Company had federal net operating loss (“NOL”)
carryforwards of approximately $3.8 million that will expire in tax years up through 2037. The NOLs generated in tax years 2018
and forward will carry forward indefinitely, but the deductibility of such federal net operating losses is limited. The NOL and
tax credit carryforwards may be further subject to the application of Section 382 of the Internal Revenue Code of 1986, as amended
(the “Code”), as discussed further below. The Company has provided a valuation allowance to offset the deferred tax
assets due to the uncertainty of realizing the benefits of the net deferred tax asset.
The
Company’s issuances of common and preferred stock have likely resulted in ownership changes as defined by Section 382 of
the Code; however, the Company has not conducted a Section 382 study to date. It is possible that a future analysis may result
in the conclusion that a substantial portion, or perhaps substantially all of the Company’s NOL carryforwards and R&D
tax credit carryforwards will expire due to the limitations of Sections 382 and 383 of the Code. As a result, the utilization
of the carryforwards may be limited and a portion of the carryforwards may expire unused.
The
Company is subject to U.S. federal tax examinations by tax authorities for the years 2010 to 2009 due to the fact that NOL carryforwards
exist going back to 2010 that may be utilized on a current or future year tax return.
6.
Commitments and Contingencies
License
Obligation and Manufacturing Agreements
The
Company entered into an exclusive license agreement with The Henry M. Jackson Foundation (“HJF”) in April 2009, as
amended, pursuant to which it acquired exclusive marketing rights to GP2, the Company’s product candidate. In consideration
for such licensed rights, the Company issued HJF 202,619 shares of the Company’s common stock valued at $0.267 per share,
which is amortized over 15 years at $3,607 per year. Pursuant to the exclusive license agreement, the Company is required to pay
an annual maintenance fee, milestone payments and royalty payments based on sales of GP2 and to reimburse HJF for patent expenses
related to GP2. The Company currently depends on third-party contract manufacturers for all required raw materials, active pharmaceutical
ingredients, and finished product candidate for the Company’s clinical trials.
Accounts
payable includes accrued patent and license obligations to HJF, including accrued interest, plus accrued expenses for manufacturing
of GP2 for the upcoming Phase III clinical trial through purchase orders with Polypeptide Laboratories and Stratum Medical, which
total $730,309 as of December 31, 2019 and $277,556 as of December 31, 2018.
GREENWICH
LIFESCIENCES, INC.
NOTES
TO FINANCIAL STATEMENTS
6.
Commitments and Contingencies (cont.)
Legal
Proceedings
From
time to time, the Company may be involved in disputes, including litigation, relating to claims arising out of operations in the
normal course of business. Any of these claims could subject the Company to costly legal expenses and, while management generally
believes that there will be adequate insurance to cover different liabilities at such time the Company becomes a public company
and commences clinical trials, the Company’s future insurance carriers may deny coverage or policy limits may be inadequate
to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material
adverse effect on the results of operations and financial position. Additionally, any such claims, whether or not successful,
could damage the Company’s reputation and business. The Company is currently not a party to any legal proceedings, the adverse
outcome of which, in management’s opinion, individually or in the aggregate, could have a material adverse effect on our
results of operations or financial position.
7.
Stockholders’ Deficit
In
2019, an aggregate total of 8,255,052 shares of the Company’s common stock were issued to retire all related party payables,
to cancel all warrants, and to compensate and incentivize management, directors, and consultants.
On
September 30, 2019, the board of directors (the “Board”) and stockholders of the Company adopted the Greenwich LifeSciences,
Inc. 2019 Equity Incentive Plan setting aside and reserving 1,498,128 shares of common stock without any issuance of common stock
or options under the plan. In addition, on September 30, 2019, the Board authorized the Company to enter into a lock-up/leak-out
agreement with its shareholders, the size of the Board was increased from three to five members, two new members were appointed
to the Board, $12 million of related party payables and 2,675,602 warrants were exchanged for 8,012,684 shares of the Company’s
common stock, and 155,433 shares of the Company’s common stock were issued upfront at no value in consideration for services
and 908,242 shares of the Company’s common stock were authorized to be issued at $2,037,000 value based on various vesting
schedules that start monthly vesting on October 1, 2019 and on the first day of each subsequent month.
As
of December 31, 2019, 77,571 shares of the 908,242 shares of the common stock grant has vested at $173,943 value and 830,671 shares
remain unvested and unrecognized at $1,863,057 value.
On
December 30, 2019, the Company issued a consultant 9,364 shares of the Company’s common stock for services rendered at $21,000
value.
Pursuant
to ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,”
the Company’s warrants were valued using the Black-Scholes option pricing model. Assumptions used in the valuation include
the following: a) market value of stock on measurement date of $0.00; b) risk-free rate of 0.49%; c) volatility factor of 109%;
d) dividend yield of 0.00%. Based on the valuation, the warrants had no value on the grant date of September 30, 2019.
In
addition, the Company modified the exercise price of all 2,675,602 warrants to $0 on the modification date of September 30, 2019,
and thus the Company exchanged the 2,675,602 warrants for 2,675,602 shares of the Company’s common stock at no value on
the modification date. The warrants were valued using the Black-Scholes option pricing model. Assumptions used in the valuation
include the following: a) market value of stock on measurement date of $0.00; b) risk-free rate of 0.49%; c) volatility factor
of 109%; d) dividend yield of 0.00%. Based on the valuation, the modified warrants had no value on the modification date of September
30, 2019. Therefore, no incremental expense was recorded due to the modification.
No
new equity was raised in 2019 and 2018, except for the transfer of preferred stock from one custodian to another which included
the final transaction for the purchase of 18,727 shares of Series D Preferred Stock from a custodian in 2018 at the original issuance
price of $5.34 per share.
As
of December 31, 2019, the Company has 1,520,937 shares of Series A Preferred Stock issued and outstanding with a purchase price
and conversion price of $0.267 per share.
GREENWICH
LIFESCIENCES, INC.
NOTES
TO FINANCIAL STATEMENTS
7.
Stockholders’ Deficit (cont.)
As
of December 31, 2019, the Company has 129,267 shares of Series B Preferred Stock issued and outstanding with a purchase price
and conversion price of $1.335 per share with anti-dilution protection of 50% of the subsequent round price if a subsequent round
is priced at or below $2.67 per share and a floor of $0.534 per share to limit the anti-dilution protection.
As
of December 31, 2019, the Company has 66,575 shares of Series C Preferred Stock issued and outstanding with a purchase price and
conversion price of $2.67 per share with anti-dilution protection of 66.7% of the subsequent round price if a subsequent round
is priced at or below $4.005 per share and a floor of $0.801 per share to limit the anti-dilution protection.
As
of December 31, 2019, the Company has 263,586 shares of Series D Preferred Stock issued and outstanding with a purchase price
and conversion price of $5.34 per share with anti-dilution protection of 80% of the subsequent round price if a subsequent round
is priced at or below $6.675 per share and a floor of $0.801 per share to limit the anti-dilution protection.
The
Series A Preferred Stock has liquidation preference over the Series B Preferred Stock, which has liquidation preference over the
Series C Preferred Stock, which has liquidation preference over the Series D Preferred Stock. The holders of preferred stock shall
be entitled to receive dividends, on a pari passu basis with the common stock, when, as and if dividends are declared by the Company’s
board of directors. Each holder of preferred stock shall be entitled to a number of votes equal to the number of whole shares
of common stock into which such holder’s shares of preferred stock could then be converted and shall have voting rights
and powers equal to the voting rights and powers of the common stock. Each share of preferred stock shall automatically be converted
into fully paid and nonassessable shares of common stock, at the then effective conversion price, (i) upon the vote, written consent,
or conversion of the holders of at least a majority of the issued and outstanding shares of that series of preferred stock, (ii)
the closing of an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933,
as amended, covering the offer and sale of common stock, or (iii) upon the merger of the Company with an entity whose shares of
common stock trade publicly.
Warrants
No
new warrants were granted in 2019 and 2018. At December 31, 2018, outstanding warrants to purchase shares of common stock, accounted
for as equity or liabilities, are as follows:
Shares
Underlying Outstanding Warrants
|
|
|
Exercise
Price
|
|
|
Expiration
Date
|
|
302,256
|
|
|
$
|
0.27
|
|
|
July
27, 2020
|
|
155,433
|
|
|
$
|
1.34
|
|
|
September
20, 2020
|
|
159,085
|
|
|
$
|
2.67
|
|
|
September
30, 2020
|
|
592,700
|
|
|
$
|
5.34
|
|
|
June
30, 2021
|
|
604,703
|
|
|
$
|
5.34
|
|
|
June
30, 2022
|
|
262,173
|
|
|
$
|
5.34
|
|
|
June
30, 2023
|
|
280,899
|
|
|
$
|
5.34
|
|
|
June
30, 2024
|
|
318,353
|
|
|
$
|
5.34
|
|
|
June
30, 2025
|
|
2,675,602
|
|
|
|
|
|
|
|
The
weighted average exercise price of outstanding warrants to purchase common stock at December 31, 2018 was $4.38 per share with
remaining terms expiring between July 27, 2020 to June 30, 2025.
As
of December 31, 2019 there are no outstanding warrants to purchase shares of common stock, accounted for as equity or liabilities.
Shares
Underlying Outstanding Warrants as of December 31, 2018
|
|
|
Shares
Underlying Warrants Exchanged on September 30, 2019
|
|
|
Shares
Underlying Outstanding Warrants as of December 31, 2019
|
|
|
2,675,602
|
|
|
|
(2,675,602)
|
|
|
|
—
|
|
GREENWICH
LIFESCIENCES, INC.
NOTES
TO FINANCIAL STATEMENTS
8.
Subsequent Events
On
June 22, 2020, the Company filed an amendment to its Amended and Restated Certificate of Incorporation to effectuate a 1-for-2.67
reverse stock split of the Company’s issued and outstanding common and preferred stock. No fractional shares were issued
and any fractional shares resulting from the stock split were rounded up to the nearest whole share. All common and preferred
stock share and per-share data and conversion or exercise price data for applicable common stock equivalents included in these
financial statements have been retroactively adjusted to reflect the reverse stock split.
GREENWICH
LIFESCIENCES, INC.
BALANCE
SHEETS
AS
OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019 (UNAUDITED)
|
|
September
30,
2020
|
|
|
December
31,
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
6,214,337
|
|
|
$
|
6,835
|
|
Deferred
offering costs
|
|
|
42,580
|
|
|
|
—
|
|
Total
current assets
|
|
|
6,256,917
|
|
|
|
6,835
|
|
Acquired
patents, net
|
|
|
17,130
|
|
|
|
19,836
|
|
Total
assets
|
|
$
|
6,274,047
|
|
|
$
|
26,671
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders’ deficit
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable & accrued interest
|
|
$
|
800,219
|
|
|
$
|
730,309
|
|
Accrued
offering costs
|
|
|
42,580
|
|
|
|
—
|
|
Unreimbursed
Expenses
|
|
|
138,009
|
|
|
|
11,626
|
|
Advance
from related party/shareholder
|
|
|
635,154
|
|
|
|
635,154
|
|
Total
current liabilities
|
|
|
1,615,962
|
|
|
|
1,377,089
|
|
Total
liabilities
|
|
|
1,615,962
|
|
|
|
1,377,089
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock,
$0.001 par value; 100,000,000 shares authorized; 11,970,185 and 8,458,048 shares issued and outstanding as of September 30,
2020 and December 31, 2019, respectively
|
|
|
11,970
|
|
|
|
8,458
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value; 10,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
Series A preferred
stock: No shares as of September 30, 2020 and 1,520,937 shares issued and outstanding as of December 31, 2019
|
|
|
—
|
|
|
|
1,521
|
|
Series B preferred
stock: No shares as of September 30, 2020 and 129,267 shares issued and outstanding as of December 31, 2019
|
|
|
—
|
|
|
|
129
|
|
Series C preferred
stock: No shares as of September 30, 2020 and 66,575 shares issued and outstanding as of December 31, 2019
|
|
|
—
|
|
|
|
67
|
|
Series D preferred
stock: No shares as of September 30, 2020 and 263,586 shares issued and outstanding as December 31, 2019
|
|
|
—
|
|
|
|
264
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
32,572,042
|
|
|
|
25,853,134
|
|
Accumulated
deficit
|
|
|
(27,925,927
|
)
|
|
|
(27,213,991
|
)
|
Total
stockholders’ equity (deficit)
|
|
|
4,658,085
|
|
|
|
(1,350,418
|
)
|
Total
liabilities and stockholders’ equity
|
|
$
|
6,274,047
|
|
|
$
|
26,671
|
|
The
accompanying notes are an integral part of these interim unaudited financial statements.
GREENWICH
LIFESCIENCES, INC.
STATEMENTS
OF OPERATIONS
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED)
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Revenue
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
158,031
|
|
|
|
284,504
|
|
|
|
458,726
|
|
|
|
2,347,746
|
|
General
and administrative
|
|
|
98,834
|
|
|
|
51,509
|
|
|
|
253,210
|
|
|
|
741,025
|
|
Total
operating expenses
|
|
|
256,865
|
|
|
|
336,013
|
|
|
|
711,936
|
|
|
|
3,088,771
|
|
Loss
from operations
|
|
|
(256,865
|
)
|
|
|
(336,013
|
)
|
|
|
(711,936
|
)
|
|
|
(3,088,771
|
)
|
Net
loss
|
|
$
|
(256,865
|
)
|
|
$
|
(336,013
|
)
|
|
$
|
(711,936
|
)
|
|
$
|
(3,088,771
|
)
|
Per share
information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share, basic and diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(1.15
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(13.26
|
)
|
Weighted
average common shares outstanding, basic and diluted
|
|
|
8,788,032
|
|
|
|
291,780
|
|
|
|
8,628,958
|
|
|
|
232,916
|
|
The
accompanying notes are an integral part of these interim unaudited financial statements.
GREENWICH
LIFESCIENCES, INC.
STATEMENTS
OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED)
|
|
Common
Stock
|
|
|
Preferred
Stock
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Shares
|
|
|
Par
Amount
|
|
|
Shares
|
|
|
Par
Amount
|
|
|
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Stockholders’
Deficit
|
|
Balances,
December 31, 2018
|
|
|
202,996
|
|
|
$
|
203
|
|
|
|
1,980,365
|
|
|
$
|
1,981
|
|
|
$
|
13,666,446
|
|
|
$
|
(23,788,684
|
)
|
|
$
|
(10,120,054
|
)
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(148,731
|
)
|
|
|
(148,731
|
)
|
Balances,
March 31, 2019
|
|
|
202,996
|
|
|
|
203
|
|
|
|
1,980,365
|
|
|
|
1,981
|
|
|
|
13,666,446
|
|
|
|
(23,937,415
|
)
|
|
|
(10,268,785
|
)
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,604,027
|
)
|
|
|
(2,604,027
|
)
|
Balances,
June 30, 2019
|
|
|
202,996
|
|
|
|
203
|
|
|
|
1,980,365
|
|
|
|
1,981
|
|
|
|
13,666,446
|
|
|
|
(26,541,442
|
)
|
|
|
(12,872,812
|
)
|
Exchange
of related party payables and warrants for common stock
|
|
|
8,012,684
|
|
|
|
8,013
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,991,987
|
|
|
|
—
|
|
|
|
12,000,000
|
|
Stock-based
compensation
|
|
|
155,433
|
|
|
|
155
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(155
|
)
|
|
|
—
|
|
|
|
—
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(336,013
|
)
|
|
|
(336,013
|
)
|
Balances,
September 30, 2019
|
|
|
8,371,113
|
|
|
$
|
8,371
|
|
|
|
1,980,365
|
|
|
$
|
1,981
|
|
|
$
|
25,658,278
|
|
|
$
|
(26,877,455
|
)
|
|
$
|
(1,208,825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2019
|
|
|
8,458,048
|
|
|
$
|
8,458
|
|
|
|
1,980,365
|
|
|
$
|
1,981
|
|
|
$
|
25,853,134
|
|
|
$
|
(27,213,991
|
)
|
|
$
|
(1,350,418
|
)
|
Stock-based
compensation
|
|
|
77,571
|
|
|
|
78
|
|
|
|
—
|
|
|
|
—
|
|
|
|
173,865
|
|
|
|
—
|
|
|
|
173,943
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(244,641
|
)
|
|
|
(244,641
|
)
|
Balances,
March 31, 2020
|
|
|
8,535,619
|
|
|
|
8,536
|
|
|
|
1,980,365
|
|
|
|
1,981
|
|
|
|
26,026,999
|
|
|
|
(27,458,632
|
)
|
|
|
(1,421,116
|
)
|
Stock-based
compensation
|
|
|
77,571
|
|
|
|
78
|
|
|
|
—
|
|
|
|
—
|
|
|
|
173,865
|
|
|
|
—
|
|
|
|
173,943
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(210,430
|
)
|
|
|
(210,430
|
)
|
Balances,
June 30, 2020
|
|
|
8,613,190
|
|
|
|
8,614
|
|
|
|
1,980,365
|
|
|
|
1,981
|
|
|
|
26,200,864
|
|
|
|
(27,669,062
|
)
|
|
|
(1,457,603
|
)
|
Stock-based
compensation
|
|
|
73,356
|
|
|
|
73
|
|
|
|
—
|
|
|
|
—
|
|
|
|
164,978
|
|
|
|
—
|
|
|
|
165,051
|
|
Issuance
of common stock in initial public offering, net of offering costs
|
|
|
1,260,870
|
|
|
|
1,260
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,206,242
|
|
|
|
—
|
|
|
|
6,207,502
|
|
Additional
preferred stock issued due to anti-dilution
|
|
|
—
|
|
|
|
—
|
|
|
|
42,404
|
|
|
|
42
|
|
|
|
(42
|
)
|
|
|
—
|
|
|
|
—
|
|
Conversion
of preferred to common stock
|
|
|
2,022,769
|
|
|
|
2,023
|
|
|
|
(2,022,769
|
)
|
|
|
(2,023
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(256,865
|
)
|
|
|
(256,865
|
)
|
Balances,
September 30, 2020
|
|
|
11,970,185
|
|
|
$
|
11,970
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
32,572,042
|
|
|
$
|
(27,925,927
|
)
|
|
$
|
4,658,085
|
|
The
accompanying notes are an integral part of these interim unaudited financial statements.
GREENWICH
LIFESCIENCES, INC.
STATEMENTS
OF CASH FLOWS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (UNAUDITED)
|
|
Nine
Months Ended
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
Operating
activities:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(711,936
|
)
|
|
$
|
(3,088,771
|
)
|
Adjustments
required to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
2,706
|
|
|
|
2,705
|
|
Stock-based
compensation
|
|
|
512,937
|
|
|
|
—
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
15,000
|
|
|
|
323,092
|
|
Accrued
interest
|
|
|
54,910
|
|
|
|
42,599
|
|
Unreimbursed
expenses (accrued)
|
|
|
126,383
|
|
|
|
141,275
|
|
Related
party payable
|
|
|
—
|
|
|
|
2,500,000
|
|
Net
cash used in operating activities
|
|
|
—
|
|
|
|
(79,100
|
)
|
Financing
activities:
|
|
|
|
|
|
|
|
|
Net
proceeds from initial public offering of common stock
|
|
|
6,207,502
|
|
|
|
—
|
|
Net
cash provided by (used in) financing activities
|
|
|
6,207,502
|
|
|
|
—
|
|
Net
increase (decrease) in cash
|
|
|
6,207,502
|
|
|
|
(79,100
|
)
|
Cash,
beginning of period
|
|
|
6,835
|
|
|
|
85,102
|
|
Cash,
end of period
|
|
$
|
6,214,337
|
|
|
$
|
6,002
|
|
|
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Common
stock to settle related party payable
|
|
|
—
|
|
|
|
12,000,000
|
|
Conversion
of preferred stock to common
|
|
|
2,023
|
|
|
|
—
|
|
Issuance
of preferred stock due to antidilution
|
|
|
42
|
|
|
|
—
|
|
The
accompanying notes are an integral part of these interim unaudited financial statements.
GREENWICH
LIFESCIENCES, INC.
NOTES
TO FINANCIAL STATEMENTS
(UNAUDITED)
1.
Organization and Description of the Business
Greenwich
LifeSciences, Inc. (the “Company”) was incorporated in the state of Delaware in 2006 under the name Norwell, Inc.
In March 2018, Norwell, Inc. changed its name to Greenwich LifeSciences, Inc. The Company is developing a breast cancer immunotherapy
focused on preventing the recurrence of breast cancer following surgery.
2.
Liquidity
On
August 27, 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2014-05, Disclosure
of Uncertainties about an Entity’s ability to Continue as a Going Concern (“ASU 2014-05”), which requires
management to assess a company’s ability to continue as a going concern within one year from financial statement issuance
and to provide related footnote disclosures in certain circumstances.
The
accompanying financial statements and notes have been prepared assuming the Company will continue as a going concern. During the
year ended December 31, 2019, the Company suffered from recurring losses from operations and negative cash flows from operations,
resulting in a need for, among other things, capital resources. As of December 31, 2019, the Company had cash of $6,835 and disclosed
that its ability to continue as a going concern was predicated on the Company’s ability to raise capital and to sustain
adequate working capital to finance its operations. During the nine months ended September 30, 2020, the Company completed its
initial public offering and raised $7,250,002 in gross proceeds and $6,207,502 in net proceeds, after deducting underwriting discounts
and commissions and other offering expenses. The Company met and exceeded those predications thus mitigating any substantial doubt
about the Company’s ability to continue as a going concern as defined by ASU 2014-05 and its ability to satisfy the estimated
liquidity needs for the twelve months from the issuance of the financial statements.
3.
Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the Securities and Exchange Commission (the “SEC”)
and should be read in conjunction with the audited financial statements and notes thereto of the Company contained in the Company’s
prospectus dated September 24, 2020.
In
the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial
position and the results of operations for the interim periods presented have been reflected herein. The results of operations
for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial
statements that would substantially duplicate the disclosures contained in the audited financial statements of the Company for
the years ended December 31, 2019 and 2018 as reported in the Company’s prospectus dated September 24, 2020 and filed with
the SEC on September 28, 2020 with respect to its initial public offering have been omitted.
Basic
and Diluted Loss per Share
As
of September 30, 2020, the Company has common stock equivalents related to warrants outstanding to acquire 100,869 shares of the
Company’s common stock. As of September 30, 2019, the Company had common stock equivalents related to warrants outstanding
to acquire 2,675,602 shares of the Company’s common stock.
As
of September 30, 2020, the Company has no common stock equivalents related to convertible preferred stock issued and outstanding.
As of September 30, 2019, the Company had common stock equivalents related to 1,520,937 shares of the Company’s common stock
issuable upon conversion of the Company’s Series A Preferred Stock, 129,267 shares of the Company’s common stock issuable
upon conversion of the Company’s Series B Preferred Stock, 66,575 shares of the Company’s common stock issuable upon
conversion of the Company’s Series C Preferred Stock, and 263,586 shares of the Company’s common stock issuable upon
conversion of the Company’s Series D Preferred Stock issued and outstanding.
3.
Significant Accounting Policies (cont.)
The
following table sets forth the computation of basic and diluted net loss per common share for the periods indicated:
|
|
Nine
Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Basic
and diluted net loss per share calculation:
|
|
|
|
|
|
|
|
|
Net
loss, basic
|
|
|
(711,936
|
)
|
|
|
(3,088,771
|
)
|
Net
loss, diluted
|
|
|
(711,936
|
)
|
|
|
(3,088,771
|
)
|
Weighted
average common shares outstanding, basic and diluted
|
|
|
8,628,958
|
|
|
|
232,916
|
|
Net
loss per common share, basic and diluted
|
|
$
|
(0.08
|
)
|
|
$
|
(13.26
|
)
|
4.
Related Party Transactions
Unreimbursed
expenses have been accrued and incurred by management, which totaled $138,009 as of September 30, 2020 and $11,626 as of December
31, 2019. In October 2019, the Kenneth Hallock and Annette Hallock Revocable Trust (the “Hallock Trust”) loaned $200,000
to the Company and Eric Rothe, a director of the Company, loaned $15,000 to the Company, both of which are payable on demand,
are not secured, and do not incur interest. Kenneth Hallock, a director of the Company, is one of the Trustees of the Hallock
Trust. In 2018, the Hallock Trust loaned $100,000 to the Company that is payable on demand, not secured, and does not incur interest.
In total, Snehal Patel, the Company’s Chief Executive Officer and director, Eric Rothe, the Company’s director and
the Hallock Trust of which Kenneth Hallock, the Company’s director is a Trustee, have loaned the Company an aggregate of
$635,154 as of September 30, 2020 and December 31, 2019 all of which is payable on demand, is not secured, and does not incur
interest.
Related
party payables to the Company’s officers and directors since January 1, 2010 totaled $12.0 million as of September 30, 2019.
Related party payables decreased from $12.0 million to $0 and all of the Company’s 2,675,602 warrants were cancelled on
September 30, 2019, as all related party payables and all warrants were exchanged for an aggregate of 8,012,684 shares of the
Company’s common stock on September 30, 2019.
5.
Commitments and Contingencies
License
Obligation and Manufacturing Agreements
The
Company entered into an exclusive license agreement with The Henry M. Jackson Foundation (“HJF”) in April 2009, as
amended, pursuant to which it acquired exclusive worldwide rights to several U.S. and foreign patents and patent applications
covering methods of using GP2, the Company’s product candidate, as an immunotherapy that elicits a targeted immune response
against HER2/neu-expressing cancers. Pursuant to the exclusive license agreement, the Company is required to pay an annual
maintenance fee, milestone payments and royalty payments based on sales of GP2 and to reimburse HJF for patent expenses. The Company
currently depends on third-party contract manufacturers for all required raw materials, active pharmaceutical ingredients, and
finished product candidate for the Company’s clinical trials.
Accounts
payable includes accrued patent and license obligations to HJF, including accrued interest, plus accrued expenses for manufacturing
of GP2 for the upcoming Phase III clinical trial through purchase orders with Polypeptide Laboratories and Stratum Medical, which
totaled $800,219 as of September 30, 2020 and $730,309 as of December 31, 2019.
Legal
Proceedings
From
time to time, the Company may be involved in disputes, including litigation, relating to claims arising out of operations in the
normal course of business. Any of these claims could subject the Company to costly legal expenses and, while management generally
believes that there will be adequate insurance to cover different liabilities at such time the Company commences clinical trials,
the Company’s future insurance carriers may deny coverage or policy limits may be inadequate to fully satisfy any damage
awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on the Company’s
results of operations and financial position. Additionally, any such claims, whether or not successful, could damage the Company’s
reputation and business. The Company is currently not a party to any legal proceedings, the adverse outcome of which, in management’s
opinion, individually or in the aggregate, could have a material adverse effect on the Company’s results of operations or
financial position.
6.
Stockholders’ Equity
On
September 30, 2019, the board of directors (the “Board”) and stockholders of the Company adopted the Greenwich LifeSciences,
Inc. 2019 Equity Incentive Plan pursuant to which the Company reserved 1,498,128 shares of common stock without any issuance of
common stock or options under the plan. In addition, on September 30, 2019, the Board authorized the Company to enter into lock-up/leak-out
agreements with its stockholders; the size of the Board was increased from three to five members; two new members were appointed
to the Board; $12 million of related party payables and 2,675,602 warrants were exchanged for 8,012,684 shares of the Company’s
common stock; 155,433 shares of the Company’s common stock were issued upfront at no value in consideration for services;
and 908,242 shares of the Company’s common stock were authorized to be issued at a $2,037,000 value based on various vesting
schedules which vesting schedules commenced on October 1, 2019 and continue to vest on the first day of each subsequent month.
As
of September 30, 2020, 306,069 of the 908,242 shares of the common stock grant had vested at a $686,880 value and 602,173 of these
shares remain unvested and unrecognized at a $1,354,889 value. In January, February, and March 2020, a total of 77,571 shares
of common stock grants had vested at a $173,943 value. In April, May, and June 2020, a total of 77,571 shares of common stock
grants had vested at a $173,943 value. In July, August, and September 2020, a total of 73,356 shares of common stock grants had
vested at a $165,051 value. For the nine months ended September 30, 2020, a total of 228,498 shares of common stock grants had
vested at a $512,937 value.
On
June 22, 2020, the Company filed an amendment to its Amended and Restated Certificate of Incorporation, as amended (the “Certificate
of Incorporation”), to effectuate a 1-for-2.67 reverse stock split of the Company’s issued and outstanding common
and preferred stock. No fractional shares were issued and any fractional shares resulting from the stock split were rounded up
to the nearest whole share. All common and preferred stock share and per-share data and conversion or exercise price data for
applicable common stock equivalents included in these financial statements have been retroactively adjusted to reflect the reverse
stock split.
Deferred
offering costs totaled $42,580 as of September 30, 2020, and included $21,900 in filing agent expenses, and $20,680 in auditor
expenses.
No
new equity was raised in 2019.
Initial
Public Offering (IPO)
On
September 25, 2020, the Company completed its initial public offering (the “IPO”) pursuant to which it issued and
sold 1,260,870 shares of its common stock at a public offering price of $5.75 per share for gross proceeds of $7,250,002 and net
proceeds of $6,207,502, after deducting underwriting discounts and commissions and offering expenses borne by the Company, which
totaled $1,042,500. In addition, the Company granted the underwriters a 45-day option to purchase up to 189,130 additional shares
of common stock at the public offering price, less offering expenses, to cover over-allotments, if any.
On
September 29, 2020, in connection with the completion of the IPO, the Company converted all of the outstanding shares of Series
A Preferred Stock into an aggregate of 1,520,937 shares of common stock, all of the outstanding shares of Series B Preferred Stock
into an aggregate of 129,267 shares of common stock, all of the outstanding shares of Series C Preferred Stock into an aggregate
of 66,575 shares of common stock and all of the outstanding shares of Series D Preferred Stock into an aggregate of 305,990 shares
of common stock upon the closing of the IPO, which included the issuance of an aggregate of 42,404 additional shares of common
stock upon the issuance and conversion of an additional 42,404 shares of Series D Preferred Stock issuable in connection with
the IPO as a result of the anti-dilution protection set forth in the Company’s Certificate of Incorporation; based upon
the IPO price of $5.75 per share.
On
September 29, 2020, in connection with the completion of the IPO, the Board and stockholders of the Company approved the Company’s
Second Amended and Restated Bylaws and the filing of the Company’s Second Amended and Restated Certificate of Incorporation
with the Delaware Secretary of State which authorizes the Company to issue 100,000,000 shares of common stock with a par value
of $0.001 per share and 10,000,000 shares of preferred stock with a par value of $0.001 per share. In addition, on September 29,
2020, the Company entered into an employment agreement with Snehal Patel pursuant to which Mr. Patel will serve as the Company’s
Chief Executive Officer as described in the Company Current Report on Form 8-K filed with the SEC on October 1, 2020.
Warrants
Prior
to the IPO, there were no outstanding warrants to purchase shares of common stock accounted for as equity or liabilities.
On
September 25, 2020, in connection with the IPO, the underwriter, Aegis Capital Corp., was issued a warrant to purchase 100,870
shares of common stock, representing 8% of the number of shares sold in the IPO, excluding the over-allotment option. The warrants
will be exercisable at any time and from time to time, in whole or in part, during a period commencing March 24, 2021 and expiring
September 24, 2025. The warrants will be exercisable at a price equal to $7.1875 per share, which represents 125% of the public
offering price per share of common stock sold in the IPO. In the event that a registration statement registering the common stock
underlying the warrants is not effective, the warrants may be exercised on a cashless basis. If the warrants are exercised for
cash within the first six months of the period in which they are exercisable, the exercise price will be equal to 97% of 125%
of the public offering price or $6.9718 per share.
At
September 30, 2020, outstanding warrants to purchase shares of common stock accounted for as equity or liabilities were as follows
with an aggregate intrinsic value as of September 30, 2020 of zero:
Shares
Underlying
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Exercise
|
|
|
Expiration
|
|
Warrants
|
|
|
Price(1)
|
|
|
Date(1)
|
|
|
|
|
|
|
|
|
|
|
100,870
|
|
|
$
|
7.1875
|
|
|
|
September
24, 2025
|
|
|
100,870
|
|
|
|
|
|
|
|
|
|
(1)
|
The
warrants are exercisable at any time and from time to time, in whole or in part, during a period commencing March 24, 2021
and expiring September 24, 2025. The exercise price of the warrants is $7.1875 per share or $6.9718 per share if the warrants
are exercised for cash within the first six months of the period in which they are exercisable.
|
660,000
Shares
Common
Stock
Prospectus
December
17, 2020
Aegis
Capital Corp.
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