U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 2021
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ___________ to _____________
Commission File Number: 000-54296
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AXIM Biotechnologies,
Inc.
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(Exact name of registrant as specified in its charter)
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Nevada
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27-4029386
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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6191 Cornerstone Court,E, Suite 114
San Diego, CA 92121
(Address of principal executive offices)
Registrant’s telephone number, including area code: (858)
923-4422
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $0.0001 par value
Indicate by check mark whether the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act Yes
☐ No ☒
Indicate by check mark whether the registrant is not required to
file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange
Act of 1934 during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes
☒ No ☐
Indicate by check mark whether registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment of this Form 10-K. ☒
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule12b-2 of the Exchange
Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated Filer
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Smaller reporting company
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☒
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Emerging growth Company
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 7(a)(2)(B) of the Securities
Act. ☐
Indicate by check mark whether the registrant has filed a report on
and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the
registered public accounting firm that prepared or issued its audit
report. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by
non-affiliates of the registrant as of June 30, 2021, based upon
the closing price of the common stock as reported by
finance.yahoo.com on such date, was approximately $34,848,485. This
calculation does not reflect a determination that persons are
affiliates for any other purposes.
As of April 12, 2022, there were 152,001,782 shares of the
registrant’s common stock were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
AXIM
BIOTECHNOLOGIES, INC.
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2021
TABLE OF CONTENTS
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information required by the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), with the Securities and Exchange
Commission (the “SEC”). Our SEC filings are available to the public
from the SEC’s internet site at http://www.sec.gov.
On our Internet website, http://www.aximbiotech.com, we post
the following recent filings as soon as reasonably practicable
after they are electronically filed with or furnished to the SEC:
our annual reports on Form 10-K, our quarterly reports on Form
10-Q, our current reports on Form 8-K, and any amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of
the Exchange Act.
When we use the terms “AXIM,” “Company,” “we,” “our” and “us”
we mean Axim Biotechnologies, Inc., a Nevada corporation, and its
consolidated subsidiaries, taken as a whole, as well as any
predecessor entities, unless the context otherwise
indicates.
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K, the other reports, statements, and
information that the Company has previously filed with or furnished
to, or that we may subsequently file with or furnish to, the SEC
and public announcements that we have previously made or may
subsequently make include, may include, or may incorporate by
reference certain statements that may be deemed to be
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995, as amended, and that are
intended to enjoy the protection of the safe harbor for
forward-looking statements provided by that Act. To the extent that
any statements made in this report contain information that is not
historical, these statements are essentially forward-looking.
Forward-looking statements can be identified by the use of words
such as “anticipate,” “estimate,” “plan,” “project,” “continuing,”
“ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,”
“could,” and other words of similar meaning. These statements are
subject to risks and uncertainties that cannot be predicted or
quantified and, consequently, actual results may differ materially
from those expressed or implied by such forward-looking statements.
Such risks and uncertainties include, without limitation,
marketability of our products; legal and regulatory risks
associated with trading publicly; our ability to raise additional
capital to finance our activities; the future trading of our common
stock; our ability to operate as a public company; our ability to
protect our proprietary information; general economic and business
conditions; the volatility of our operating results and financial
condition; our ability to attract or retain qualified senior
management personnel and research and development staff; and other
risks detailed from time to time in our filings with the SEC, or
otherwise.
Information regarding market and industry statistics contained in
this report is included based on information available to us that
we believe is accurate. It is generally based on industry and other
publications that are not produced for purposes of securities
offerings or economic analysis. Forecasts and other forward-looking
information obtained from these sources are subject to the same
qualifications and the additional uncertainties accompanying any
estimates of future market size, revenue and market acceptance of
products and services. We do not undertake any obligation to
publicly update any forward-looking statements. As a result,
investors should not place undue reliance on these forward-looking
statements.
PART
I
Item
1. Business
Overview
Axim Biotechnologies, Inc., a Nevada corporation, is a leading
developer of diagnostic healthcare solutions serving to enhance the
health of people. Through the development of diagnostic solutions
that quickly and accurately diagnose various diseases, our products
allow healthcare workers to quickly test and treat at the
point-of-care, which leads to improved patient outcomes and
provides numerous economic benefits to the healthcare system.
Axim’s core competencies include development of rapid lateral flow
immunoassays, reagents and monoclonal antibody development for such
assays. Our current products fall into these categories:
(1) SARS-CoV-2 neutralizing antibody tests;
(2) Eye Health, wherein we acquired two FDA cleared 510(k) tests
for dye eye disease and have internally developed a third assay;
and
(3) Oncology, where we licensed from Mayo Clinic and Arizona State
University Quiescin Sulfhydryl Oxidase 1 (“QSOX1”), an important
enzyme for cancer growth, invasion and metastasis.
Additional tests are currently in development as part of our focus
on maintaining a robust product pipeline that can deliver future
growth.
Our principal executive office is located at 6191 Cornerstone
Court, E. Suite 114, San Diego, CA 92121. Our telephone number is
(858) 923-4422 and our website is www.aximbiotech.com. Unless
expressly noted, none of the information on our website is part of
this Annual Report on Form 10-K. Our common stock is quoted on the
OTCQB Marketplace operated by the OTC Markets Group, Inc., under
the ticker symbol “AXIM.”
Historical Business Operations
We were originally incorporated in the State of Nevada on November
18, 2010, under the name AXIM International, Inc. On July 24, 2014,
we changed our name to AXIM Biotechnologies, Inc.
The Company’s historical business operations focused on the
research, development and production of pharmaceutical,
nutraceutical and cosmetic products based upon our proprietary
technologies. This business and its related intellectual property
were divested by the Company in May 2020.
In March 2020, we acquired Sapphire Biotech, Inc. (“Sapphire”), a
diagnostic healthcare solutions company, changing our business
operations.
Acquisition of Sapphire Biotech, Inc.
On March 17, 2020, we entered into a Share Exchange Agreement with
Sapphire and all of its stockholders, pursuant to which, upon
closing of the transaction, we: (i) acquired 100% of Sapphire’s
outstanding capital, consisting of 100,000,000 shares of common
stock; and (ii) assumed all of the outstanding debt of Sapphire.
The outstanding debt included two convertible notes in the
principal amounts of $310,000 and $190,000, respectfully.
In exchange for 100% of the issued and outstanding shares of
Sapphire, we issued an aggregate of 54,000,000 newly issued shares
of Company common stock to Sapphire’s existing stockholders (the
“Share Exchange”). As a result of the Share Exchange, Sapphire
became a wholly owned subsidiary of the Company, which has resulted
in consolidated financial reporting by the Company to include the
results of Sapphire.
Acquisition of Advanced Tear Diagnostics,
LLC technology
On August 26, 2021, we purchased certain eye disease diagnostic
technology from Advanced Tear Diagnostics, LLC, a Delaware Limited
Liability Company (“Advanced Tear”), consisting of a 510(K) license
for Lactoferrin, a biomarker for dry eye disease and a 510(K)
license for IgE, a biomarker for allergic ocular reaction
(collectively, the “510(K) Licenses”). The purchase price for the
510(K) Licenses was $4,270,000, which price was paid by issuing
7,000,000 restricted shares of Company common stock to Advanced
Tear.
Also on August 26, 2021, we purchased five patents (the “Patents”)
from Advanced Tear for $250,000 (which includes assuming and paying
$30,000 of the Advanced Tear liabilities). The bulk of the purchase
price ($210,000) was in a note that requires seven equal monthly
payments of $30,000, which payment started on September 3, 2021.
The note has since been repaid in full.
Current Operations Following Acquisition of Sapphire and
Advanced Tear’s Assets
COVID-19
As Sapphire had been a pioneer in the research and development of
diagnostic tools for the early screening of cancer cells, our
researchers were able to quickly adapt our existing research and
technology to create diagnostic tools that screen for COVID-19
neutralizing antibodies. The current need for such an instrument is
great, as the pandemic continues to plague the worldwide healthcare
landscape.
SARS-CoV-2, the virus responsible for the COVID-19 pandemic, has
spread at an alarming rate since the first cases were identified in
late 2019 in Wuhan, China. The virus can be transmitted from
person-to-person in respiratory secretions from symptomatic or
asymptomatic individuals. Since the virus was new to the human
population and death rates are 10 to 50-fold higher than other
respiratory viruses, the pandemic has placed excessive demands on
the global healthcare network. Because initially there were no
vaccines or effective antiviral therapies that existed for
SARS-CoV-2, efforts to combat this pandemic have been
challenging.
Polymerase chain reaction (“PCR”) tests that detect active
SARS-CoV-2 infection are playing an important role in tracking
disease spread, while serological tests that detect antibodies
against SARS-CoV-2 are now being used to measure past rates of
infection and identify individuals that could be immune to
COVID-19. However, not all antibodies are created equal and tests
that specifically measure antibodies that neutralize SARS-CoV-2
have not been generally available to healthcare providers or
patients.
SARS-CoV-2 neutralizing antibodies block binding and entry of the
virus into host cells. It is desirable to have high levels of
neutralizing antibodies in convalescent plasma used to treat
patients fighting COVID-19 so that those antibodies can block the
virus from further infecting the host. However, despite
convalescing from the disease, not all individuals make high levels
of neutralizing antibodies. Therefore, there is a clinical need to
measure levels of neutralizing antibodies in COVID-19 convalescent
plasma.
The most widely used antibody tests on the market today do not
specifically identify neutralizing antibodies. Instead, they
measure a large family of antibodies that bind to various parts of
the virus, but that do not necessarily neutralize it. To address
this shortcoming, we developed a patent-pending rapid diagnostic
test, which is specifically focused on measuring the levels of
functional neutralizing antibodies that prevent SARS-CoV-2 from
attaching to human cells. The test is based on blocking the
interaction between human cell receptors and the viral spike
protein that mimics the virus neutralization process in the
body.
Why A Neutralizing Antibody Test
Our test is a rapid (10-minute) serological diagnostic test that
measures SARS-CoV-2 neutralizing antibodies, or Nabs. Our
SARS-Cov-2 Neutralizing Antibody (“Nab”) Rapid Test is the first of
its kind, and is a rapid lateral flow chromatographic immunoassay
intended for the semi-quantitative measurement of neutralizing
antibody in human serum or plasma (sodium heparin, potassium and
acid dextrose citrate) or fully quantitative with the use of an
electronic reader. The test SARS-Cov-2 Neutralizing Antibody Rapid
Test measures Nabs within 10 minutes, unlike traditional tests,
which require days. Our test kit does not utilize live biological
materials and does not require the strict biosafety protocol
associated with live virus samples.
Specifically, we envision that our test may be used for the
following:
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(i)
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Measurement of neutralizing antibodies in individuals who have
recovered from COVID-19 and/or received a vaccine and to provide an
“Immunity Passport” so that they can go back to work and school or
participate in social gatherings without risk of infecting others.
The primary goal of any vaccine is to induce neutralizing antibody
responses that protect vaccine recipients from infection and
subsequent disease. As COVID-19 vaccines have been rolling out to
the general public, we believe immunity monitoring is starting to
play a critical role in determining whether the vaccine is
effective, for how long, and when it is time for recipients of the
vaccine to get a booster shot. Since immunity to the virus is not
anticipated to last forever, the immunity monitoring could continue
for many years, even after widespread vaccination throughout the
world.
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Additionally, we believe that measuring neutralizing antibodies in
vaccine recipients after vaccination may provide greater insight
into how vaccine responses hold up over time. That way, when levels
of neutralizing antibodies eventually decrease, vaccine recipients
will have a sense of when their neutralizing antibodies are
unacceptably low and a revaccination is necessary to continue their
protection from COVID-19.
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(ii)
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Screening plasma collected from individuals recovered from COVID-19
so that patients fighting COVID-19 can be treated with plasma
containing high levels of Nabs. Additionally, Nabs need to be
monitored in patients receiving convalescent plasma so that we
learn what is an effective therapeutic dose.
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Our test is different from neutralizing antibody tests currently
available because:
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It
specifically tests for neutralizing antibodies, which are those
needed to fight COVID-19 within the body;
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It
can quantitatively measure the amount of neutralizing antibodies a
person has;
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Patients get their results in just a few minutes; and
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It
is portable.
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In preclinical research, our test has already been proven to work
with 97.8% accurately in plasma and serum and can easily be
modified to work on any specific strains of COVID-19; accordingly,
we believe that newly-discovered strains will not affect its
efficacy. Our test has shown a significantly better statistical
correlation with SARS-CoV-2 neutralization assays than the
currently available antibody tests. Since the rapid test lends well
to conducting live virus-based assays, we believe that it could
serve as an effective low-cost alternative to lab-based assays for
monitoring large numbers of vaccine recipients for neutralizing
antibodies.
As our scientific team was hard at work developing our COVID-19
rapid diagnostic tests we were frustrated by the delays and costs
caused by lack of supply of a recombinant virus binding protein
(“VBP”) for SARS-CoV-2 were essential to our testing. To continue
our projects as planned and decrease overall costs, we decided to
make our own VBP, which is even more potent than current outsourced
options. Our laboratory tests have proven that SARS-CoV-2 receptor
binding domain (“RBD”) spike protein binds with our novel VBP.
Initial tests also show that our novel VBP is approximately ten
times more potent and stable than other VBP options currently on
the market. We now develop these core ingredients needed to
manufacture test strips in-house, and believe that moving such
production in-house provides us with the potential to derive
additional revenue and also allows us to control our supply chain.
We have already manufactured enough VBP for millions of rapid
diagnostic tests.
In August 2020, we signed an exclusive licensing, manufacturing and
distribution agreement with Empowered Diagnostics, LLC
(“Empowered”) to execute the high-volume production of our rapid
point-of-care diagnostic test. Together with Empowered, we
completed the technology transfer, and Empowered built out their
production facility to enable them to manufacture millions of our
tests per month. The test was used to complete two human
point-of-care clinical trials, and Empowered Diagnostics filed for
FDA emergency use approval (“EUA”) of the device on March 24,
2021.
On January 28, 2022, the FDA notified Empowered that it was issuing
a Class One recall for the test together with Empowered’s antigen
test for mislabeling. The FDA also notified Empowered that it would
no longer consider EUA’s unless they were fully quantitative and
because the test Empowered had filed the EUA for was
semi-quantitative it would be denied. As per our agreement, we
notified Empowered on February 10, 2022 that we were giving a
30-day cure notice as per the agreement or we would be terminating
the agreement. On March 4, 2022, the two companies entered into a
separation agreement.
On March 6, 2022, we announced that while the Company explores
filing one or more EUA’s for point of care and/or at home use, we
would begin to offer the test For Research Use Only (“RUO”), as it
does not require FDA approval.
The test can facilitate research in a variety of areas related to
COVID-19, including, diagnostic test development, vaccine and
therapeutic development, studies related to immunity and adaptive
immune response, and epidemiological research into the control of
the virus. The Nab test will allow researchers to assess the
efficacy of COVID-19 vaccines and compare effectiveness of
naturally acquired vaccine-induced antibody response.
The Company is making two tests available for RUO, including the
quantitative measurement of neutralizing antibodies using a reader,
which will provide the exact number detected, and a
semi-quantitative test for the measurement of neutralizing
antibodies, which will identify high, medium, and low
neutralization titers.
Notwithstanding ongoing monitoring of immune responses, there is an
urgent need to fully understand the efficacy of vaccines and to
identify what are the correlates of protection. Offering our Nab
tests for RUO may help support vaccine efficacy evaluation and herd
immunity assessments. In fact, our partner and co-inventor of the
test, Dr. Douglas Lake, has already tested hundreds of ASU students
and faculty with our Nab test. Dr. Lake has an ongoing correlative
study to measure exposure to the SARS-CoV-2 virus at different
points in time by measuring and tracking the Nab levels before and
after receiving vaccines, and before and after contracting the
virus. Dr. Lake and the AXIM team have published numerous tentative
reports regarding the correlation between vaccine immunity and
natural immunity. Dr. Lake will continue his studies over the
course of a year with the objective of determining definitive
correlates of protection.
About Emergency Use Authorizations (EUAs)
The Emergency Use Authorization (“EUA”) authority allows FDA to
help strengthen the nation’s public health protections against
chemical, biological, radiological, and nuclear threats including
infectious diseases, by facilitating the availability and use of
medical countermeasures needed during public health
emergencies.
Under section 564 of the Federal Food, Drug, and Cosmetic Act, when
the Secretary of Health and Human Services (“HHS”) declares that an
emergency use authorization is appropriate, FDA may authorize
unapproved medical products or unapproved uses of approved medical
products to be used in an emergency to diagnose, treat, or prevent
serious or life-threatening diseases or conditions caused by CBRN
threat agents when certain criteria are met, including there are no
adequate, approved, and available alternatives. The HHS declaration
to support such use must be based on one of four types of
determinations of threats or potential threats by the Secretary of
HHS, Homeland Security, or Defense.
On February 4, 2020, the HHS Secretary determined that there is a
public health emergency that has a significant potential to affect
national security or the health and security of United States
citizens living abroad, and that involves the virus that causes
COVID-19.
COVID-19 Emergency Use Authorizations for Medical
Devices
In vitro diagnostic (“IVD”) devices are tests performed on
samples taken from the human body, such as swabs of mucus from
inside the nose or back of the throat, or blood taken from a vein
or fingerstick. IVDs can detect diseases or other conditions and
can be used to monitor a person’s overall health to help cure,
treat, or prevent diseases.
There are several types of SARS-CoV-2 and COVID-19 related
IVDs:
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Diagnostic Tests: Tests that detect parts of the
SARS-CoV-2 virus and can be used to diagnose infection with the
SARS-CoV-2 virus. These include molecular tests and antigen
tests.
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Serology/Antibody and Other Adaptive Immune Response
Tests: Tests that detect antibodies (for example, IgM,
IgG) to the SARS-CoV-2 virus or that measure a different adaptive
immune response (such as, T cell immune response) to the SARS-CoV-2
virus. These types of tests cannot be used to diagnose a current
infection.
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Tests for Management of COVID-19 Patients: Beyond
tests that diagnose or detect SARS-CoV-2 virus or antibodies, there
are also tests that are authorized for use in the management of
patients with COVID-19, such as to detect biomarkers related to
inflammation. Once patients are diagnosed with COVID-19 disease,
these additional tests can be used to inform patient management
decisions.
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On September 16, 2020, we filed an EUA application with the FDA for
measuring COVID-19 neutralizing antibodies in plasma and serum
through our first-in-class rapid diagnostic test. We amended the
EUA to include positive results from a Biosafety Level 3 (BSL-3)
live virus test that positively correlates the rapid 10-minute
lateral flow assay test that accurately detects and measures levels
of functional COVID-19 neutralizing antibodies in plasma which the
FDA demanded.
On March 24, 2020, our manufacturing partner at the time, Empowered
Diagnostics, filed an EUA application with the FDA for measuring
COVID-19 neutralizing antibodies in whole blood for a Point-of-Care
application of our rapid diagnostic test. On November 15, 2021, the
FDA announced that it was changing its guidelines for neutralizing
antibodies tests and would only accept applications for fully
quantitative tests. In January 2022, the FDA informed Empowered it
would not approve the EUA. While the Company contemplates filing a
new EUA, we have announced that we will begin sale of the test for
Research Only Use.
Our COVID-19 related product candidates, including our lateral flow
diagnostic test for measuring SARS-CoV-2 neutralizing antibodies,
are subject to uncertainties relating to product development,
regulatory approval and commercialization, and further risks based
on the constantly evolving situation affecting the United States
and the international community. Even if we are able to
commercialize our product candidates, there is no assurance that
these candidates would generate revenues or that any revenues
generated would be sufficient for us to become profitable or
thereafter maintain profitability. Additionally, due to the
COVID-19 pandemic the FDA is over-run with EUA applications from
thousands of biotech and pharmaceutical companies and 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.
Eye Health
On August 26, 2021, we acquired the intellectual property and the
exclusive global rights to market two FDA approved lateral flow
assays which utilize a non-invasive, quantitative, point of care
human tear test to aid in the diagnosis and selection of
therapeutics for the treatment of eye diseases.
Currently, we have FDA 510k approval to test Lactoferrin (aqueous
deficiency biomarker) and IgE (non-specific allergy biomarker). Our
objective is to establish point of care testing for dry eye disease
(“DED”) and to establish this modality as the new standard of care.
The tests are quick, simple to use, and inexpensive to the clinic.
The tests are CMS and private insurance reimbursable.
While at one time the tests were sold in numerous eye doctors
locations, when the Company acquired the assays they had been
mothballed and the Company had to redevelop the tests, reagents and
select a quantitative reader. Since the acquisition of the
technology, the Company has been successful in redevelopment and is
preparing to launch sales.
We have signed a supply agreement with Barcelona-based IUL SA
(“IUL”) for our iPeak DED readers, which will be deployed
for diagnostic testing with a focus on lactoferrin and IgE levels.
This state-of-the-art portable reader is a colorimetric lateral
flow reader designed to hold different cassette sizes and can read
cassettes of up to five strips and seven lines per strip at a
time.
iPeak is equipped with “Flash Eye” technology based on the
principles of machine vision illumination. Its camera captures the
image of the test illuminated from LED lights situated in the most
studied geometry to achieve a precise and uniform illumination and
enhance the colors of any lateral flow test. The iPeak technology
also allows for more sensitivity, which is the main success of its
application.
We evaluated the iPeak readers in the lab against six other
comparable products before deciding on IUL’s state-of-the-art
products. The new readers will be calibrated with the new test
strips and distributed to our Medical Advisory Board (“MAB”) of
renowned DED experts for non-clinical field testing on their
patients, which includes studying the accuracy and ease of use.
These tests are expected to run for a few weeks and the MAB will
provide management with data and feedback regarding the test
results and any other research findings.
The Company’s diagnostic testing process for DED, and specifically
for lactoferrin levels as a primary indicator, will include the use
of reagent strip samples. These strips will have the patients’ tear
sample obtained and applied and then an ophthalmologist or
optometrist will run the strips through an reader to determine
lactoferrin levels and incidence and severity of DED.
Our tests are considered moderately complex by CLIA. This requires
the user of the test to obtain a CLIA certificate of compliance.
This is done by filing a simple application with CMS. (Form 116).
We will assist in the filing to provide an effortless process for
the customer. Additionally, we are pursuing a waiver for current
and future product offerings and intend to file for the waiver in
the second or third quarter of 2022.
To manage and navigate the CLIA compliance, readers, lab testing
and field-testing process, we have retained veteran laboratory
testing executive Barry Craig as a consultant. In this role, he
will manage the Company’s DED lab testing initiative. He has more
than 25 years of experience in the clinical laboratory as a
Generalist, QA Coordinator, and Microbiology Supervisor. He also
served as Lab Coordinator for the Children’s Hospital of Alabama
for 12 years. Craig has deep-seated experience in regulatory
compliance as the owner of Laboratory Consulting, LLC, and has
served as the Regulatory Compliance Consultant for CLIA, the
Commission on Office Laboratory Accreditation (“COLA”), and the
College of American Pathologists (“CAP”). He has successfully
established more than 200 moderate and high complexity
laboratories, and is a contributor for several trade publications
such as MLO magazine, ADVANCE for Administrators of the Laboratory
Magazine, and Physician Office Resource Magazine.
We believe that the acquisition of these FDA 510k approved
diagnostic products, along with proven management practices and
capital, will allow the business to grow at a rapid pace. Low
levels of Lactoferrin confirm inadequate glandular tear production
(aqueous deficiency) and high levels of IgE indicate an active
ocular allergy. If both biomarkers are normal, the cause of a
patient’s dry eye condition could be attributed to evaporative dry
eye. So, by performing these two tests, an eye doctor may now
precisely know the underlying cause of the tear film disorder, its
severity and the appropriate treatment protocol to pursue. In
addition, these tests are rapid, accurate, reimbursable, profitable
and can be performed by a technician, which allows the physician to
be more productive and attend to more patients.
Dye Eye Market
An estimated 16 million Americans have been diagnosed with DED, but
the actual number of Americans suffering from dry eye symptoms is
likely much higher. Some reports indicate that nearly half of all
U.S. adults experience dry eye signs and symptoms, and 33% of
patients in eye care clinics present with complaints about dry
eye.
DED, though widespread, is under-diagnosed, in part because
symptoms do not always correlate with objective signs. It has a
highly variable symptom profile at different stages of the disease,
and there is often a discordance between signs and symptoms. A
patient can have severe symptoms yet show no sign of ocular surface
damage, while others have advanced ocular surface damage, yet
report no symptoms. This lack of correlation between clinical signs
and symptoms of DED makes diagnosing and treating patients a
challenge. Often times, inflammation is present before the clinical
signs of DED.
Currently, our eye business focuses exclusively on ophthalmology
and optometry, in the United States, where there are 37,000
optometrists and 19,000 ophthalmologists performing approximately
400,000 medical (dilated) eye exams per day. Of this total, we
believe that approximately 20% to 30% would present with symptoms
where ATD’s Lactoferrin & IgE tests would be indicated. It is
estimated that total US market for our eye care systems could
approach 50,000 systems. (USA Only)
We have completed development of our immunoassay system, which
includes an automated colorimetric photometer reader and two FDA
market cleared point-of-care (POC) quantitative diagnostic
ophthalmic lab tests. These are:
Ocular Lactoferrin CPT code 83520 2021 CMS reimbursement $17.27/eye
*
Ocular Immunoglobulin E CPT Code 83520 2021 CMS reimbursement
$16.46/eye*
Studies indicate that in 2021, 16-49 million Americans had DED,
representing 32 - 98 million potential use cases for our POC tests.
These tests are not limited to DED diagnostics, but can also be
used to determine the Lf and allergic components of tear film prior
to:
|
|
·
|
Contact lens fitting – approximately 45 million people wear contact
lens in the US alone (2021).
|
|
|
·
|
LASIK surgery- approximately 718,000 (2020).
|
|
|
·
|
Cataract surgery with lens exchange - approximately 3.8 million
(2018).
|
The barrier for entrance into the dry eye space is difficult and
requires extensive clinical studies, large capital expense and FDA
510k approval. This process alone can take several years and
substantial investment, with no certainty that the product will
receive FDA 510k approval.
Business Model
Our eye business model will utilize a razor/razor blade model. The
two sources of revenue: (1) the sale of readers and (2) sale of
disposable tests. It is anticiapted.that 95+% of gross profits will
be generated from the sale of tests. We have not determined the
list price of the readers. Discounts will be offered to purchasing
groups, corporate accounts, academic institutions engaged in
research or training, and others as deemed appropriate. It is
anticipated that the average price for the reader will be slightly
above our acquisition costs, while pricing of consumable diagnostic
kits will be at roughly half of the CMS published reimbursement
floor rate. Current pricing is $2,100 for 100 bilateral test
cassettes (200 tests) and provides a margin of approximately 65 -
72%.
Market demand for the system is expected to be moderate to begin
with until we become a preferred vendor with a large purchasing
group or until we are granted a waiver from CLIA.. At that time we
expect high demand for our system. We also expect high demand for
our recently developed MMP-9 quantitative test once we get FDA
approval. While we must compete with other capital equipment
expenditures under consideration in any ophthalmic physician’s
office, we believe that no other ophthalmic device offers the
combination of compelling clinical and financial benefits afforded
by our system. The clinical utility of the tests offers important
diagnostic precision, differentiation and treatment management
direction. Inner-office efficiencies significantly improve the
patient flow characteristics, reducing patients in office visit
time and greatly reducing physicians chair time with each
patient.
Financially, for every patient per day tested the physician will
receive, on average, $2 in reimbursement for every $1 expended on
supplies.
CMS and private insurance allow for physicians to retest their
patients as often as deemed medically necessary. The average
retesting rate for Lactoferrin is 65% ,while the IgE retesting rate
is 35%.
Dye Eye Disease Competition
Currently there are five FDA approved tests for DED:
|
Biomarker
|
|
Company
|
|
Type
|
|
CLIA status
|
|
|
|
|
|
|
|
|
|
Lactoferrin
|
|
Axim
|
|
(quantitative analysis)
|
|
moderate complexity
|
|
|
|
|
|
|
|
|
|
IgE
|
|
Axim
|
|
(quantitative analysis)
|
|
moderate complexity
|
|
|
|
|
|
|
|
|
|
MMP9
|
|
Quidel
|
|
(qualitative only)
|
|
waived
|
|
|
|
|
|
|
|
|
|
Osmolarity
|
|
TearLab
|
|
(quantitative analysis)
|
|
waived
|
|
|
|
|
|
|
|
|
|
Ocular Adenovirus
|
|
Quidel.
|
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(qualitative only)
|
|
waived
|
The preferred clinical analysis is quantitative, giving us an
advantage over the competition. Since our reader can interpret many
different analytes other than Lf and IgE, it also opens the
possibility of additional quantitative test development.
New Eye Heath Division Additions
On September 15, 2021, we announced that we had appointed Jeffrey
A. Busby to Senior Vice President – Business Development. Mr. Busby
brings more than 30 years’ experience developing and managing
national and international ophthalmic medical device sales and
support teams. That experience includes Sr. Regional Management -
Alcon Laboratories, Ft. Worth, TX, US Director of Sales VISX, Santa
Clara, CA, Director of Global Strategic Accounts, Advanced Medical
Optics (AMO) ( Canada, Latin America and Europe). Mr. Busby served
for eight years as Chief Commercial Officer for Advanced Tear
Diagnostics, located in Birmingham, AL, and most recently, Chief
Revenue Officer Scanoptix, located in Charlottesville, VA.
In this newly created position, Mr. Busby will be responsible for
the launch and commercialization of the Company’s recently
announced acquisition of diagnostic technologies for DED that
includes two FDA cleared 510(k) authorizations for the commercial
sale of two ophthalmic “point of care” diagnostic lab tests --
which are approved for reimbursement by both CMS and private
insurance and will be used by both Optometrists and
Ophthalmologists.
On September 21, 2021, we announced that we had appointed Joseph
Tauber, MD as Chief Medical Officer and Chairman of our Medical
Advisory Board. With over 30 years of clinical experience, Dr.
Tauber is an internationally recognized authority in the field of
ocular surface diseases including dry eye and meibomitis
management. He is an entrepreneurial private practice
ophthalmologist with extensive experience as a clinical trials
researcher and business consultant to global health product
companies and institutional investors. Dr. Tauber has served on
numerous scientific advisory boards and as the Ophthalmology
representative at institutional investor-focused conferences.
Dr. Tauber is the founder and CEO of Tauber Eye Center, a practice
focused on corneal disease, uveitis and ocular immunology and
complex corneal surgical procedures, as well as Medical Director of
Saving Sight, the US’ third largest eye bank. Dr. Tauber has been
centrally involved in numerous significant dry eye development
projects during the past 25 years. He has served as a Principal
Investigator in over 140 multicenter clinical trials, including
those that led to the approval of all four medications currently
approved by the FDA for the treatment of dry eye – Restasis,
Xiidra, Cequa and Eyesuvis. He has been avidly involved in
research for nearly three decades, and has served as a principal
investigator in over 140 research studies across a broad range of
eye conditions, including high-risk corneal transplantation,
inflammation and allergic eye diseases, corneal infectious diseases
and numerous ocular surface conditions.
Dr. Tauber received his doctorate from Harvard Medical School,
residency training in internal medicine at Beth Israel Hospital and
in ophthalmology at Tufts-New England Medical Center, and
fellowship training in Ocular Immunology and in Corneal Diseases
and Surgery at the Massachusetts Eye & Ear Infirmary, all in
Boston, Massachusetts. Dr. Tauber has also written eight book
chapters and over 80 peer-reviewed articles in the fields of ocular
surface and immunologic disease for prestigious medical journals as
Ophthalmology, Investigative Ophthalmology and Visual Science,
Journal of Cataract and Refractive Surgery and Cornea. He has been
awarded the Heed Ophthalmic Foundation Fellowship Award and a
National Eye Institute Individual NRSA Award.
On October 05, 2021, we announced that we had appointed Laura M.
Periman, MD to our recently established Medical Advisory Board. Dr.
Periman brings 30 years’ experience in medicine, the last 20 of
which include her clinical practice specializing in ocular surface
disease and DED. Currently, she serves as Founder and Director of
Dry Eye Services and Clinical Research of the Seattle-based Periman
Eye Institute. Additionally, she has served as a principal
investigator in ophthalmic clinical research primarily centered on
ocular surface disease innovations including neural stimulation for
treating DED, novel topical therapeutics as well as innovative
procedures such as IPL, Radiofrequency and more. Dr. Periman is an
international lecturer and has also served as a reviewer and editor
for various top-tier medical journals, and is a consultant to
numerous leading ophthalmic pharmaceutical and medical device
companies.
Dr. Periman is a board-certified ophthalmologist,
fellowship-trained cornea and refractive surgeon. She has published
over a dozen peer-reviewed publications, six as first author and
has written and presented extensively on the topic of Ocular
Surface Disease. Dr. Periman is a manuscript reviewer for
“Ophthalmology,” and “Photobiomodulation, Photomedicine and Laser
Surgery,” and serves on the editorial boards of “Journal of Dry Eye
and Ocular Surface Disease,” “Ophthalmology Management” and “Ocular
Surgery News.” She is a member of numerous Scientific Advisory
Boards, and frequent presenter for or on behalf of these companies,
including: Alcon, Allergan, Avellino, Azura, Eyedetec, Eyevance,
Horizon, Johnson &Johnson, Novartis, NuLids, Sight Sciences,
Sun, TearLab, and Visant. Dr. Periman completed her Ophthalmology
Residency as well as Cornea/Refractive Fellowship at the University
of Washington in Seattle.
On October 11, 2021, we announced that we had appointed Henry D.
Perry, MD to our recently established Medical Advisory Board. A
recipient of the Life Achievement Award from the American Academy
of Ophthalmology, Dr. Perry is recognized as one of the US’ leading
cornea and refractive surgeons. He serves as Senior Founding
Partner, Ophthalmic Consultants of Long Island as well as Chief,
Cornea Service, Nassau University Medical Center, New York. He has
won numerous Best Doctor awards and was recently recognized as one
of the top 150 Ophthalmologists in America by “Newsweek” magazine
in 2021.
Dr. Perry is the Senior Founding Partner of Ophthalmic Consultants
of Long Island, and Chief, Cornea Service at Nassau University
Medical Center, East Meadow, New York. He earned his medical degree
with honors from the University of Cincinnati College of Medicine
and completed his residency at the Nassau County Medical Center and
the University of Pennsylvania Scheie Eye Institute. Dr. Perry went
on to earn fellowships in Ophthalmic Pathology at the Armed Forces
Institute of Pathology in Washington D.C., and in cornea and
external disease at the cornea service of the Massachusetts Eye and
Ear Infirmary, Harvard University. He then served two years in the
United States Army as Major, Medical Corps at Fort Sam Houston, San
Antonio and Fort Dix, New Jersey.
Dr. Henry Perry is recognized as one of the leading cornea and
refractive surgeons in the US and has written over 200 papers and
chapters on corneal and refractive surgery and ophthalmic
pathology. He has given over 500 invited lectures around the US and
abroad including several named lectureships. He has served as
medical director of the Lions Eye Bank for Long Island at Northwell
Health since 1987. He serves as Senior Editor for the Journal
“Cornea” and is the winner of the Honor Award, Senior Honor Award
and Life Achievement Award from the American Academy of
Ophthalmology. He has won numerous Best Doctor awards and was
recently recognized as one of the top 150 Ophthalmologists in
America by “Newsweek” magazine in 2021.
On October 20, 2021, we announced that we had appointed Kelly
K. Nichols, O.D., M.P.H. and Ph.D. to our Medical Advisory Board. A
founding member of the Ocular Surface Society of Optometry, Dr.
Nichols currently serves as Dean of the School of Optometry at The
University of Alabama at Birmingham. She is an acknowledged expert
on DED and Ocular Surface Disease and has been extensively
published. She earned her second B.S. and a Doctor of Optometry
(“O.D.”) at UC Berkeley, and an M.P.H in biostatistics and a Ph.D.
in Vision Science at Ohio State University.
Dr. Nichols currently serves as Dean of the School of Optometry at
The University of Alabama at Birmingham. She has served extensively
on the Executive Board and for the Tear Film and Ocular Surface
Society and on each of the steering committees (DEWS, DEWS II,
Contact Lens Discomfort, and MGD workshops), and is a founding
member of Ocular Surface Society of Optometry. She currently serves
as president of the Association for Schools and Colleges of
Optometry (ASCO) and secretary of the National Alliance for Eye and
Vision Research (NAEVR)/ Alliance for Eye and Vision Research
(AEVR). Dr. Nichols is a leading expert in DED who has been on the
editorial boards of the journals “Optometry and Vision Science,”
and “The Ocular Surface.” Her research encompasses meibomian gland
dysfunction, dry eye in menopause, dry eye diagnostics and
therapeutics, and tear proteomics and lipidomics. She received her
Doctor of Optometry degree from the University of California at
Berkeley, completed a residency in ocular disease at Omni Eye
Specialists of Colorado, and earned her M.P.H in biostatistics and
Ph.D. in vision science at Ohio State University.
On November 02, 2021, we announced that we had
appointed Michael E. Stern, MS, Ph.D., to its Medical Advisory
Board. Dr. Stern brings over 30 years of senior scientific,
research, academic and executive level expertise with DED and
ocular surface disease (“OSD”). Currently, he is a Principal and
Chief Science Officer for immunEyze, a boutique contract research
organization that performs preclinical and clinical research for
OSD indications. Previously, he served for 26 years with Allergan,
where he rose to Principal Scientist and Vice-President
Inflammation Research and where his work included elucidating the
pathophysiology of DED. He is extensively published in leading
ocular journals.
Dr. Stern has authored over 100 publications, 300 abstracts and
several book chapters. Additionally, along with Dr. Stephen
Pflugfelder and Dr. Roger Beuerman, he published a book: Dry Eye
and Ocular Surface Disorders (2004). He is a member of the
Editorial Board of The Ocular Surface, and reviews papers for
several professional journals. Dr. Stern has finished a term as
Adjunct Associate Professor at Baylor College of Medicine (Houston,
Texas) and is currently Co-Director of Ocular Immunology at IOBA
(University of Valladolid, Valladolid, Spain). He is also a
Visiting Professor of Ophthalmology at the University of Cologne
(Germany). He has received the Diaz-Caneja Award and given the
Award Lecture at the International Ocular Surface Society. Dr.
Stern earned his BS at Purdue University, and an MS and Ph.D. in
Physiology/Ophthalmology from Medical College of Wisconsin.
New Quantitative MMP-9 Test
On March 8, 2022, we announced that we had successfully developed
what we believe to be the first-ever rapid quantitative tear test
for MMP-9, an inflammatory biomarker for DED. Matrix
metalloproteinase-9 (MMP-9), an inflammatory biomarker consistently
elevated in the tears of dry eye patients, may accelerate early
diagnosis when detected.
The central role of inflammation in OSD is widely recognized, but
our ability to measure this in the clinic has been limited to the
Quidel InflammaDry test, which measures tear matrix MMP-9 levels
and provides a positive/negative result around a threshold of
40ng/ml of MMP-9. This “yes or no” report has clinical value, but
it is limited. Currently available MMP-9 testing does not detect a
reduction in tear MMP-9 levels until the concentration drops below
40ng/ml and thus may miss clinically significant improvement that
did not reach that threshold.
The clinical benefits of our quantitative tear MMP-9 testing would
be a significant advance in the ability to measure the degree of
inflammation affecting dry eye patients, allowing for more
objective classification of their disease. Equally important would
be the ability to measure improvement in control of inflammation
that is the goal of many of our therapies for OSD, including
pharmaceuticals, thermal pulsation treatments and even light based
therapies.
We are also in the process of developing additional bio-marker
tests that will be done on the existing platform, without the
constant need of the clinician to upgrade to a newer platform. The
Lateral Flow test reader is software driven and can be programmed
to interpret other biomarkers as they are clinically studied and
FDA approved. The test uses 0.5 microliters of human tear fluid,
that is applied to a disposable lateral flow cassette (one cassette
per patient tested). The disposable single use cassette generates a
substantial, reoccurring revenue stream for our eye business and
our stakeholders.
Oncology
We acquired Sapphire in order to develop and commercialize a unique
therapeutic approach designed to disrupt cancer growth and block
metastatic spread. Prior to our acquisition of Sapphire, it
acquired an exclusive license to the technology around SBI-183, an
anti-metastatic compound developed by Dr. Douglas Lake at Mayo
Clinic and Arizona State University to inhibit QSOX1. Dr. Douglas
Lake is a co-founder of Sapphire.
Oncology Strategy
We continue to advance our mission of improving global cancer care
through the development of novel therapeutics for controlling
metastatic cancer spread, and diagnostics for early cancer
detection, response to treatment, and for monitoring post-treatment
recurrence. We aspire to be the leader in QSOX1-targeted metastatic
cancer therapies, and have undertaken the development of a potent
QSOX1 inhibitor to be used as a platform drug for a variety of
indications.
We have been investigating the enzyme Quiescin Sulfhydryl Oxidase 1
(“QSOX1”), a master regulator of extracellular matrix remodeling,
and its overexpression by tumor cells. QSOX1 is a tumor-derived
enzyme that is important for cancer growth, invasion and
metastasis. Overexpression of QSOX1 has been unambiguously linked
to promoting tumor invasion and metastasis. One of the Company’s
co-founders, Dr. Douglas Lake, has discovered that a small molecule
SBI-183 inhibited the enzymatic activity of QSOX1, and as a result,
suppressed tumor cell invasion in vitro and metastasis of
breast tumor cells in vivo. Through our medicinal
chemistry efforts, we synthesized multiple structural analogs of
SBI-183 and unveiled SPX-1009 as a lead compound that demonstrated
ten-fold improvement in suppressing invasion and metastasis in
several cancer models.
Through our medicinal chemistry efforts, we have synthesized
multiple structural analogs of SBI-183, and we unveiled SPX-1009 as
a lead compound that demonstrated ten-fold improvement in
suppressing invasion and metastasis in several cancer models.
We believe that our therapeutic drug development strategy targeting
the metastatic spread is a unique, novel and pioneering approach to
saving lives. Our near-term objective is to demonstrate the ability
of our lead anti-QSOX1 drug candidates to suppress tumor growth and
metastasis and to advance them into pre-clinical studies.
We believe that Sapphire is the first to discover the
over-expression of QSOX1 as a biomarker for cancer in blood. We
have filed a patent application claiming many discoveries related
to QSOX1, including a rapid diagnostic test, which we have
developed into a lateral flow device capable of measuring levels of
QSOX1. Our equivalent of a liquid biopsy test is a non-invasive,
rapid blood test that will measure QSOX1 over-expression. Liquid
biopsy refers to the process of testing the blood for the presence
of a disease biomarker. Most so-called “liquid biopsy” companies
test blood for circulating tumor cells (“CTCs”) and DNA sequences.
The disease biomarker we test for is an enzyme. We seek to prove
that measuring QSOX1 over-expression, even before the tumor is
formed, will enable detection of cancer at an earlier stage than
liquid biopsy companies whose tests detect the CTC’s and DNA,
usually after the tumor is formed and is shedding cells.
On January 13, 2020, Sapphire entered into an agreement with
Skysong Innovations, LLC (“Skysong”) for an exclusive license to
technology relating to SBI-183, an anti-metastatic compound
suppressing tumor cell growth and blocking metastasis. As
consideration for the license agreement, the Company agreed to
grant Skysong (as licensing agent for Mayo Clinic Ventures and
Arizona State University) 80,000 shares of Sapphire, which
converted into 4,800,000 shares of Axim Biotechnologies, Inc., upon
the merger.
Effective February 7, 2020, Sapphire entered into an Industry
Sponsored Research Agreement (“SRA”) to test and confirm the
inhibitory activity of SBI-183 and SBI-183 analogs, including those
synthesized by the Company. The testing included cell-based in
vitro assays, NMR binding studies and testing to determine if
SBI-183 enhances the activity of cytotoxic drugs in vitro. Animal
studies were also be conducted under the SRA. Specifically SBI-183
analogs will be evaluated in a mouse model of triple negative
breast cancer using human tumor xenografts.
On August 11, 2020, Sapphire was awarded a $395,880 phase I Small
Business Innovation Research (“SBIR”) grant by the National Cancer
Institute (“NCI”). The 12-month grant supported the continued
development of novel small molecules that inhibit the enzymatic
activity of QSOX1 based on our lead compound SPX-1009.
Funded by the SBIR, we have made significant progress with the
development of additional analogs of SPX-1009 and have synthesizing
derivative compounds with improved anti-metastatic action. We have
synthesized and screened more than 200 derivatives of SPX-1009,
yielding a compound with significantly increased anti-metastatic
inhibition. Recent medicinal chemistry efforts resulted in SPX-184
compound that showed much higher activity than SPX-1009 in 3D
invasion assays with MDA-MB-231cell line (MD Anderson cancer line).
SPX-184 is up to 50 times more potent than SPX-1009 and constitutes
a unique composition. Since it is not an analyte of SPX-1009,
SPX-184 is not covered under the license with Skysong
Innovations.
We continue to advance our mission of developing novel therapeutics
for controlling metastatic cancer spread, and diagnostics for early
cancer detection, response to treatment, and for monitoring
post-treatment recurrence. With Phase I of the SBIR now completed,
we are preparing to file a Phase II, seeking $1 million in grant
funding from the National Cancer Institute/National Institutes of
Health to further develop SPX-184. In addition to seeking
additional grant funding to further our cancer research and
development program, our strategies include potential partnering
with a pharmaceutical company active in cancer therapeutic and/or
licensing the technology so that it can be commercialized.
Milestones 2020 to Date
On January 13, 2020, Sapphire entered into an agreement with
Skysong for an exclusive license to technology relating to SBI-183,
an anti-metastatic compound suppressing tumor cell growth and
blocking metastasis.
On February 6, 2020, Sapphire signs an SRA with Arizona State
University to conduct in vitro testing and in
vivo pre-clinical animal studies re cancer inhibitory agents
that will prevent metastases.
On March 18, 2020, we announced the acquisition of Sapphire.
On March 24, 2020, Sapphire announced the completion of
in-vitro studies on the new compound, SPX-1009, proving
ten-fold greater inhibition of tumor metastasis than parent
compound SBI-183 following testing of over 80 analogs.
On March 27, 2020, Sapphire signed an agreement with TD2 to
initiate animal studies to evaluate the efficacy of SPX-1009 as an
anti-metastatic treatment and to measure levels of QSOX1 as a
potential companion diagnostic test.
On July 15, 2020, we announced the development of a rapid
diagnostic test measuring levels of functional neutralizing
antibodies that are believed to prevent SARS-CoV-2 from entering
the host cells. Unlike currently available serological COVID-19
tests that detect an antibody response to the virus, our rapid
10-minute test measures a specific subpopulation of antibodies to
block binding of the virus to host cell receptors. While there are
expensive, time consuming laboratory tests that measure
neutralizing antibodies, our test differs in that it is a portable,
low cost, rapid point-of-care test with results in 10 minutes.
Status: Ongoing
On August 5, 2020, we announced the development, patent filing and
EAU filing of NeuCovix-HT™, a high throughput (“HT”) patent-pending
diagnostic test that measures levels of functional antibodies in
plasma or serum that neutralize SARS-CoV-2, the virus that causes
COVID-19. Unlike current serology tests for COVID-19 that
qualitatively detect antibodies to the virus, NeuCovix-HT™
quantitatively measures functional antibodies that block binding of
the virus to host cell receptors. Status: Ongoing
On August 11, 2020, Sapphire was awarded a $395,880 phase I SBIR
grant by the NCI. The grant has supported the continued development
of novel small molecules that inhibit the enzymatic activity of
QSOX1 based on a lead compound. QSOX1 is a tumor-derived enzyme
that is important for cancer growth, invasion and metastasis.
Status: Ongoing.
On August 24, 2020, we signed an exclusive limited licensing,
manufacturing and distribution agreement with Empowered Diagnostics
LLC (“Empowered Diagnostics”) for high volume production of our
rapid diagnostic test measuring levels of functional neutralizing
antibodies that are believed to prevent SARS-CoV-2 from entering
the host cells. Status: The agreement was since been
terminated.
On September 16, 2020, we filed the EUA application with the FDA
for measuring COVID-19 neutralizing antibodies in plasma and serum
through its first-in-class rapid diagnostic test. Status: On
January 2022, the FDA notified us that the priorities for
testing had changed in favor of quantitative measurement of
neutralizing antibodies Accordingly, the Company’s EUA for the
qualitative test would no longer be considered.
On September 22, 2020, we announced that the United States Patent
and Trademark Office (“USPTO”) had issued the Company a new Notice
of Allowance for a patent (Application No. 15/748,784) on
anti-neoplastic compounds and methods targeting QSOX1, an enzyme
important for tumor cell growth, invasion and metastasis.
On September 29, 2020, we announced that we had filed a provisional
patent for a first-in-class face mask that captures and deactivates
SARS-CoV-2, the coronavirus responsible for the ongoing COVID-19
pandemic.
On December 31, 2020, we announced that we had filed a provisional
patent for a recombinant VBP for SARS-CoV-2, the coronavirus
responsible for the current COVID-19 pandemic, and are now
manufacturing the VBP. As a result, we no longer need to rely on
outside protein supply to continue our research and can greatly cut
down on our manufacturing costs.
On December 3, 2020, we announced the development and patent filing
for an enzyme-linked immunosorbent assay (“ELISA”)-based diagnostic
test for the detection of SARS‐CoV-2 neutralizing antibodies.
Status: Ongoing
On February 3, 2021, we announced the initiation of clinical trials
for ImmunoPass, our rapid point-of-care test that
semi-quantitatively measures levels of neutralizing antibodies to
COVID-19. Status: Completed
On March 8, 2021, we announced that we had successfully completed
point-of-care clinical trials on our much awaited ImmunoPass rapid
test that semi-quantitatively measures levels of COVID-19
neutralizing antibodies to help understand COVID-19 immunity,
validate vaccine’s effectiveness and estimate how long the vaccine
will be effective in patients.
On March 24, 2021, the Company, through Empowered
Diagnostics, filed an EAU application with the FDA for measuring
COVID-19 neutralizing antibodies in whole blood for a Point-of-Care
rapid diagnostic test. Status: This relationship has been
terminated.
On August 03, 2021, we announced that the Company has signed a
Binding Term Sheet to acquire the technology for the testing of Dry
Eye Disease (DED), including two FDA authorizations and approvals
for the commercial sale of two ophthalmic diagnostic lab tests. The
transaction closed on August 26, 2021.
On March 6, 2022, we announced that while the Company explores
filing one or more EUA’s for point of care and/or at home use, it
would begin to sell the ImmunoPass rapid test For Research Use Only
(“RUO”) as it does not require FDA approval.
On March 8, 2022, we announced that we had successfully developed
what we believe to be the first-ever rapid quantitative tear test
for MMP-9, an inflammatory biomarker for Dry Eye Disease. Matrix
metalloproteinase-9 (MMP-9), an inflammatory biomarker consistently
elevated in the tears of dry eye patients, may accelerate early
diagnosis when detected.
Anticipated Expenses
During the next twelve months we anticipate incurring costs related
to: (i) filing Exchange Act reports, (ii) contractual obligations,
(iii) clinical trials, (iv) continued research and development, and
(v) inventory to launch sales of dye eye products.
INTELLECTUAL PROPERTY
OVERVIEW:
|
Category
|
Issued
Patent
|
Provisional
Patent Applications
|
|
|
|
|
|
QSOX-1
|
1
|
11
|
|
SARS-CoV-2
|
|
12
|
|
EYE Health
|
|
2
|
|
EIS Platform
|
|
5
|
I. QSOX1-RELATED INVENTIONS.
QSOX1 (Quiescin Sulfhydryl Oxidase 1) is an enzyme that is
over-expressed in multiple tumor types. Genetically silencing QSOX1
in tumors slows their growth, migration, invasion and metastasis.
Based on these findings, the inventors of the inventions described
below tested libraries of chemical compounds for the ability to
inhibit QSOX1. Several inhibitors of the QSOX1 enzyme were
identified. Initially, SBI-183 was identified and animal studies
confirmed its ability to suppress tumor growth. The inventors
subsequently developed an entire library of analogs of the parent
compound, SBI-183, detailed in several inventions below to identify
compounds with greater inhibitory activity. These compounds have
the potential to be developed into therapeutic treatments for
metastasis and to be used in conjunction with other neoplastic
treatments, such as chemotherapy.
Included in the group of QSOX1-related inventions below is the
identification of a specific splice variant of QSOX1, identified as
QSOX1-L, as a unique Biomarker for the detection of certain tumors
overexpressing QSOX1. This biomarker formed the basis for the
invention relating to a Rapid Diagnostic Test for certain
cancers.
A. Anti-Neoplastic Compounds and Methods Targeting
QSOX1
1. US Provisional Patent Application No. 62/218.732
filed on September 15, 2015
PCT Provisional Patent Application
W02017048712A1
US Nonprovisional Application No. 15/748,784 filed on
January 30, 2018
Patent US 10,894,034 B2 Issued January 19,
2021
Title: Anti-Neoplastic Compounds and Methods Targeting
QSOX1
Assignee: Mayo Clinic/Arizona State University
Exclusive Licensee: Axim Biotechnologies, Inc.
Compounds and methods involving inhibition of the enzymatic
activity of QSOX1. The compounds and methods can be used in
treatment of neoplastic cells to suppress tumor growth and invasion
in a variety of cancers, including but not limited to myeloma and
cancers of the breast, kidney and pancreas. Claims include the
compound SBI-183 as a neoplastic agent found to inhibit tumor
growth, invasion and suppress metastasis of tumors by inactivating
QSOX1.
a. Continuation US Patent Application
17/124/242 filed on December 16, 2020
Title: Anti-Neoplastic Compounds and Methods Targeting
QSOX1
Assignee: Mayo Clinic/Arizona State University
Exclusive Licensee: Axim Biotechnologies, Inc.
Compounds and methods involving inhibition of the enzymatic
activity of QSOX1. The compounds and methods can be used in
treatment of neoplastic cells, for example, to suppress tumor
growth and invasion in a variety of cancers, including but not
limited to myeloma and cancers of the breast, kidney, and
pancreas.
2. US Provisional Patent Application No. 62/916,065
filed on October 16, 2019
Title: Chemical Compounds that Inhibit QSOX1 for the
Treatment of Cancer
Assignees: Arizona State University/Axim Biotechnologies,
Inc.
Derivatives of the parent compound SBI-183 have been identified as
inhibiting the enzymatic activity of QSOX1. These compounds can be
used in treatment of neoplastic cells by suppressing tumor growth
and invasion in a variety of cancers that overexpress QSOX1,
including but not limited to myeloma and cancers of the breast,
kidney and pancreas.
3. US Provisional Patent Application No. 62/916,067
filed October 16, 2019
Title: Anti-Neoplastic Compounds and Methods Targeting
QSOX1
Assignees: Arizona State University/Axim Biotechnologies,
Inc.
Exclusive Licensee: Axim Biotechnologies, Inc.
Compounds that are structurally distinguishable from the compound,
SBI-183 are SPX-013 and SPX-014, and have been identified as
inhibiting the enzymatic activity of QSOX1. The compounds and
methods can be used in treatment of neoplastic cells by suppressing
tumor growth and invasion in a variety of cancers, including but
not limited to myeloma and cancers of the breast, kidney and
pancreas.
4. US Provisional Patent Application No. 62/944/283
filed December 5, 2019
Title: Anti-Neoplastic Compounds and Methods Targeting
QSOX1
Assignees: Arizona State University/Sapphire Biotech,
Inc.
Exclusive Licensee: Axim Biotechnologies, Inc.
Compounds that are structurally distinguishable from the SBI-183
have been identified as inhibiting the enzymatic activity of QSOX1.
One in particular, SPX-1009, also inhibits tumor cell growth,
migration and invasion in vitro and metastasis in a mouse model of
triple negative breast cancer. This invention concerns analogs of
this lead compound SPX-1009. In in vitro testing, the lead compound
SPX-1009 and its analogs have been found to be more potent and to
have improved pharmacodynamics in mouse models of cancer.
5. US Provisional Patent Application No. 62959752 filed
January 10, 2020
Title: Anti-Neoplastic Compounds and Methods Targeting
QSOX1 and Inhibiting Cellular Responses to MET
Receptor.
Assignee: Axim Biotechnologies, Inc.
Compounds and methods involving inhibition of the enzymatic
activity of QSOX1 and methods of inhibiting cellular responses to
the MET receptor signaling are disclosed which include
administering any one or more compounds or pharmaceutical
compositions. The compounds and methods can be used in treatment of
neoplastic cells, for example, to suppress tumor growth and
invasion in a variety of cancers, including but not limited to
myeloma and cancers of the breast, kidney and pancreas. The
uniqueness of the invention relates to the combined inhibition of
QSOX1 and cellular responses to the MET receptor signaling.
B. Unique Biomarker QSOX1-L Identified and Rapid Diagnostic
for Various Cancers
1. US Provisional Patent Application No. 62/829,556
filed April 4, 2019;
Utility Patent Application No. 16/841,521 filed April 6,
2020
International Patent Application No. PCT/US2020/026936
filed April 6, 2020
Title: Systems and Methods for Rapid Diagnostic for Various
Cancers
Assignee: Axim Biotechnologies, Inc.
QSOX1-L, a splice variant of QSOX1, has been identified as a novel
biomarker of bladder cancer and possibly other cancers in serum.
Proprietary antibodies have been generated that selectively detect
only this variant and not others. QSOX1-L has been used to develop
a rapid and cost-effective diagnostic test for bladder and possibly
other urologic cancers from urine.
C. Unique Compound SPX-184 Invented and Methods for
Neoplastic Cell Growth Inhibition of Tumors and
Cancers
2. US Provisional Patent Application No.
63/280,553 filed November 17, 2021
Title: Compositions, Compounds, and Methods for Neoplastic
Cell Growth Inhibition of
Tumors and Cancers
Assignee: Axim Biotechnologies, Inc.
The present invention generally relates to compositions, compounds
and methods for the treatment of various tumors or cancer and cell
growth inhibition utilizing SPX-184.
II. SARS-CoV-2-RELATED INVENTIONS
A. Rapid Diagnostic Test to Measure Levels of Neutralizing
Antibodies to SARS-CoV2
1. US Provisional Application No. 63/023,646 filed May
12, 2020
Title: Convalescent Plasma Testing and
Treatment
Assignee: Axim Biotechnologies, Inc. (Axim) and Arizona
State University (ASU)
Exclusive Licensee: Axim Biotechnologies, Inc. (ASU’s
Interest) Exclusive Licensee: Empowered Diagnostics, Inc. (Axim’s
Interest). License terminated March 4, 2022.
The invention refers to a Rapid Test to measure levels of
Neutralizing Antibodies to SARS-CoV2. Unlike currently available
serological COVID-19 tests that detect an antibody response to the
virus, the rapid 10-minute test measures a specific subpopulation
of antibodies that block binding of the virus to host cell
receptors. In contrast to current tests using live viruses which
are time-consuming, expensive and require trained personnel in a
tightly controlled laboratory setting to measure neutralizing
antibodies, the rapid test is a portable, low cost, rapid point-
of-care test that measures levels of neutralizing antibodies in 10
minutes.
2. US Provisional Application No. 63/144,454 Filed
February 1, 2021; US Provisional Application
No. 63/152,774 Filed February 23, 2021.
Title: Rapid LFA Diagnostic Test to Measure Levels of
Neutralizing Antibodies to SARS- CoV-2 from Whole
Blood
Assignee: Axim Biotechnologies, Inc.
Exclusive Licensee: Empowered Diagnostics, Inc. License
terminated March 4, 2022.
The invention methods and test kits can be used with any sample in
which the presence, absence and/or quantity of neutralizing
antibodies (Nabs) to SARS-CoV-2 is desired to be determined, such
as for example, serum, plasma, whole blood, saliva, mucous, and
other biological fluids. In a particular embodiment, the invention
methods and/or kits are used with whole blood.
All provisionals referenced in 1. and 2. above relating to the LFA
Diagnostic Test were the subject of a conversion into an
International Patent Application No. PCT/US2021/032106.
3. US Provisional Patent Application No.
63/252,908
Filing Date: October 6, 2021
Title: Development of the Engender
SAR-Cov2 Recombinant Protein Variants
Assignee: Axim Biotechnologies, Inc.
The invention differentiates between antibodies that bind to the
virus but do not neutralize and those that do bind and neutralize
the virus. COVID-19 vaccines do not induce high levels of
neutralizing antibodies in all recipients AXIM’s second generation
test provides users with a test that shows if they responded to
their COVID-19 vaccine and a semi-quantitative analysis of their
neutralizing antibody levels in a single test.
4. US Provisional Patent Application No.
63/275,856
Filing Date: November 4, 2021
Title: Tests For Detection of Neutralizing And
Non-Neutralizing Antibodies and Related Methods.
The invention relates to the detection of the percent neutralizing
to non-neutralizing antibodies in a single test. Totality of
non-Nab provides information on the presence of general innate
immune response Nab test determines serum neutralizing activity.
Ratio Nab/Non-Nab provides percent of protective Abs.
5. Continuation-in-Part 17/590,353
filed on February 1, 2022 to US Provisional Application 17/319,08
filed on May 12, 2021
Title: Assay for Neutralizing Antibody Testing and
Treatment
Assignee: Axim Biotechnologies, Inc.
The invention diagnostic test is intended for semi-quantitative
measurement of neutralizing antibodies in plasma, serum or whole
blood of persons who have had recent or prior infection with
SARS-CoV2 or have received a COVID-19 vaccine.
B. AlphaLisa Assay for High Throughput Detection of
Neutralizing Antibodies to SARS-CoV2
1. US Provisional Application No. 63/060,635 filed
August 3, 2020; US Provisional Application No. 63/061,112 filed
August 4, 2020
Title: NeuCovix-HT AlphaLisa assay for high throughput
detection of Neutralizing Antibodies to SARS-CoV-2
Assignee: Axim Biotechnologies, Inc. and Arizona State
University (ASU)
Exclusive Licensee: Axim Biotechnologies, Inc. (ASU’s
Interest)
The invention refers to an AlphaLisa assay for high throughput (HT)
detection of Neutralizing antibodies to SARS-CoV-2. Included in the
claims is the HT diagnostic test that measures levels of functional
antibodies in plasma or serum that neutralize SARS- CoV-2, the
virus that causes COVID19. Unlike current serology tests for COVID
19 that qualitatively detect antibodies to the virus, the HT test
quantitatively measures functional antibodies that block binding of
the virus to host cell receptors.
All provisionals relating to the AlphaLisa Assay have been
abandoned due to the Company’s decision that commercialization of
this technology is not viable.
C. Direct Competitive ELISA for the Detection of SARS-Cov2
Neutralizing Antibodies
1. US Provisional Application No. 63/152,807 filed
February 23, 2021
Title: Direct Competitive ELISA for the Detection of
SARS-CoV2 Neutralizing Antibodies
Assignee: Axim Biotechnologies, Inc.
The invention relates to a method for rapid detection of SARS-CoV2
Neutralizing Antibodies in one of the following test samples: human
or animal serum, plasma, saliva, tear, sweat, exhaled breath
condensate. The test sample is mixed with an ACE2 label detection
reagent. The sample mixture is incubated, and the quantity of ACE2
label detection reagent bound to the RBD molecules indicates the
quantity of SARs-Co2 Neutralizing Antibodies.
The provisional relating to the ELISA technology has been abandoned
due to the Company’s decision that commercialization of this
technology is not viable.
D. ACE2 Variants
1. US Provisional Application No. 63/081,811 filed
September 22, 2020
Title: Super-ACE2 Variants
Assignee: Axim Biotechnologies, Inc.
The invention relates to a new variant recombinant protein of ACE2
identified as ACE2-614-Fc (“Super ACE2”), that is more potent and
has a longer shelf life and is more stable than wild type ACE2.
Super ACE2 variant can be used in a variety of ways as follows:
a. Development of competitive assays for neutralizing antibodies
that disrupt RBD- ACE2 interaction.
b. Direct assays for virus spike antigens. Super ACE2 acts as a
very specific antibody to capture Spike proteins through the RBD
domain.
c. Cardio-vascular, blood-pressure and related disorders
therapeutic and diagnostic.
d. Anything related to the virus capture such as (i) Mask
treatments, (ii) Aerosols, (iii) Sprays and drops, (iv) Ointment
and dermal applications, (v) Surfaces
E. Facemask Having Enhanced Infectious Agent Capturing and
Related Methods
1. US Provisional Application No. 63/066,104 filed
August 14, 2020;
US Provisional Application No. 63/084,407 filed
September 28, 2020
Title: Facemask Having Enhanced Infectious Agent Capturing
and Related Methods
Assignee: Axim Biotechnologies, Inc.
The invention is a facemask with a filtration material and an
infectious agent capture-moiety. Infectious agent capture-moiety
refers to any compound or biomolecule that can bind to any
infectious agent. The filtration material acts as a scaffold to
either directly block or impede the flow-through of the infectious
agent or to support the infectious agent capture moiety. The
infectious agent capture-moiety then functions to directly block or
impede the flow-through of an infectious agent. The infectious
agent-capture moiety can aerosolized and sprayed or applied onto
pre-treated filtration material and can be specific to capture
infectious agents, such as SARS-CoV-2. In such embodiments, the
facemasks is capable of providing enhanced protection for the user
and to others from SARS-CoV2.
III. TECHNOLOGY PLATFORM-RELATED INVENTIONS
A. Electrical Capacitance/Impedance
Spectroscopy
1. Title: Imaginary Impedance Approach and Signal
Decoupling Algorithm for Multi-Marker Detection Using
Electrochemical Impedance Spectroscopy.
U.S. Patent Application Serial No.: 16/495,682 Filed: March
20, 2018
Exclusive License of Advanced Tear Diagnostics, LLC’s (ATD)
Interest: Axim Biotechnologies
Co-owned by Arizona State University.
Methods for detecting one or more analytes in a sample utilizing
Electrochemical Impedance Spectroscopy (EIS) measurement. In one
method, analyte detection includes comparing an imaginary impedance
measurement to a calibration curve of concentrations for each
target analyte. The calibration curve of concentrations for each
target analyte is established at an optimal frequency. In another
method, a signal decoupling algorithm is utilized for detection of
more than one analyte on an electrode.
2. Title: Electrochemical Osmolarity or Osmolality Sensor
for Clinical Assessment.
U.S. Provisional Patent Application Serial No.: 62/455,913.
Filed: February 7, 2017 PCT: W02018 148236
Exclusive Licensee of ATD’s Interest: Axim Biotechnologies,
Inc.
Co-owned by Arizona State University
Osmolality and osmolality sensors and methods utilizing
electrochemical impedance to detect changes in impedance to varying
salinity concentrations. By way of example, the impedance reported
at the specified frequency varies logarithmically with the
concentration of sodium chloride subject to the sensor surface.
Measurements obtained by the sensors and methods herein are
utilized, for example, to differentiate between the clinical stages
of dry eye disease (290- 316 mOsm/L) to complement the current
diagnostic procedures. Blood serum, urinalysis, and saliva also may
be tested and the corresponding osmolarity or osmolality level
evaluated for indications of a disease or condition.
3. Title: Point of Care Apparatus and Methods for Analyte
Detection Using Electrochemical Impedance
Spectroscopy.
U.S. Provisional Patent Application: US2021/011778171.
PCT/US 2018 03760. Filed: May 4, 2018
Exclusive Licensee of ATD’s Interest: Axim Biotechnologies,
Inc.
Co-owned by Arizona State University
The presence of analytes can be detected in the bodily fluid using
Electrochemical Impedance Spectroscopy (“EIS”) or Electrochemical
Capacitance Spectroscopy (“ECS”) in devices, such as handheld
point-of-care devices. The devices, as well as systems and methods,
utilize using EIS or EIS in combination with an antibody or other
target-capturing molecule on a working electrode. Imaginary
impedance or phase shift, as well as background subtraction, also
may be utilized.
4. Title: Point of Care Apparatus and Methods for Detecting
Cancer Using Electrochemical Impedance or Capacitance
Spectroscopy.
U.S. Provisional rPatent Application Serial No.: 16/119,989
Filed: August 3, 2018
Exclusive Licensee: Axim Biotechnologies, Inc.
The presence of cancer biomarkers or other analytes can be detected
in the bodily fluid using EIS or ECS in devices, such as handheld
point-of-care devices. The devices, as well as systems and methods,
utilize using EIS or ECS in combination with an antibody or other
target-capturing molecule on a working electrode. Imaginary
impedance or phase shift, as well as background subtraction, also
may be utilized.
5. Title: Point of Care Apparatus and Methods for Detecting
Cancer Using Electrochemical Impedance or Capacitance
Spectroscopy.
U.S. Patent Application Continuation-in-Part. Serial No.:
16/121,474 Filed: September 4, 2018
Exclusive Licensee: Axim Biotechnologies, Inc.
This disclosure is related to detection tools, diagnostics and
related methods in volving the use of an electrochemical sensor in
conjunction with electrochemical impedance spectroscopy or
electrochemical capacitance spectroscopy, and more particularly to
using such tools to detect cancer via biomarkers contained in
bodily fluids using such detection tools, diagnostics, and related
methods. Many different analyte detection devices and systems
exist. However, those that can be practically applied in a
clinical, point of care or other setting requiring accuracy and
reliability are fairly limited and tend to be complex and
expensive.
IV. EYE HEALTH
1. Title: TEAR SAMPLE COLLECTORS, SYSTEMS
AND METHODS
U.S. Provisional Patent Application No. 63/307,987 filed
February 8, 2022.
Exclusive Assignee: Axim Biotechnologies, Inc.
Tear fluid analysis contributes to the greater understanding of
various ocular and systemic diseases and obtaining adequate samples
for tear analysis requires effective collection methods. Most tear
sample collectors on the market use capillary designs as tear
sample collectors. These designs are intimidating to the patient
when a sharp looking object is approaching the eye, are rather
difficult to use by untrained personnel and are expensive to
manufacture. Quidel InflammaDry is using a wick type tear sample
collector that does not have any fill-up indicator and is rather
intricate to produce on mass scale. Other prototype sample
collectors employ Q-tip designs, filter paper strips (Schirmer’s
test) are imprecise, some are difficult to produce en masse. Here
we introduce a laminated and looped tear sample collectors that
addresses the above problems and that are: 1) Cost-effective to
produce on mass scale 2) Features a fill-up indicator (in case of
laminated version) 3) Easy to use 4)Soft and non-intimidating to
user and patient.
2. Title: TESTS FOR HUMAN MONOMERIC LACRITIN
US Patent Application No. 63/301,437 Filed January 20,
2022
Exclusive Licensee: AXIM Biotechnologies, Inc.
The invention relates to a Rapid Point of Care test for Human
Monomeric Lacritin. Lacritin is a tear protein that, in its
monomeric form, autonomously promotes tearing and ocular surface
survival. Lacritin is the only identified growth-like factor
decreased in tears from patients with ocular surface inflammation
resulting from blepharitis, and it is downregulated in contact
lens-related dry eye. This provisional describes six different
lateral flow assay designs for the detection of monomeric lacritin
from human tears to diagnose blepharitis, Sjögren’s syndrome, Dry
Eye Disease and other inflammatory conditions or as a companion
diagnostics at point of care settings.
V. TRADEMARKS
We have two trademarks registered with the United States Patent and
Trademark Office: Axim (Registration Date: May 19, 2015; and A Axim
Biotech (Registration Date: May 31, 2016).
Market, Customers and Distribution Methods
Our focus is on the development of innovative pharmaceutical and
diagnostic products. We plan to be an active player in the field of
biosciences with our extensive R&D and pipeline of innovative
products. Currently, our eye business focuses exclusively on
ophthalmology and optometry, in the United States, where there are
37,000 optometrists and 19,000 ophthalmologists performing
approximately 400,000 medical (dilated) eye exams per day.
Competition
The biotechnology and pharmaceutical industries are characterized
by rapidly advancing technologies, intense competition and a strong
emphasis on proprietary products.
We face competition from many different sources, including
commercial pharmaceutical and biotechnology enterprises, academic
institutions, government agencies, and private and public research
institutions. 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 or our collaborators may
develop based on the use of our technologies.
While we believe that the potential advantages of our new
technologies will enable us to compete effectively against other
providers of technology for Covid-19 NAb product development and
manufacturing, many of our competitors have significantly greater
financial resources and expertise in research and development,
manufacturing, preclinical testing, clinical trials, regulatory
approvals and marketing approved products than we do. Smaller or
early stage companies may also prove to be significant competitors,
particularly through arrangements with large and established
companies, and this may reduce the value of our technologies. In
addition, 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 advantageous
to our business.
The barrier for entrance into the dry eye space is difficult and
requires extensive clinical studies, large capital expense and FDA
510k approval. This process alone can take several years and
substantial investment, with no certainty that the product will
receive FDA 510k approval. It is estimated that as of 2021, the
total Company funding necessary to develop a Class II 510k cleared
medical device is approximately $30 million. The development and
engineering costs comprise approximately $2-5 million of this
total. There are many factors that influence these costs, including
the need for clinical studies, regulatory pathway and technology
complexity.
We believe that we are well situated in the Eye Health sector with
two 510(k) cleared tests. Additionally, the preferred clinical
analysis is quantitative, giving us an advantage over the
competition. Since our reader can interpret many different analytes
other than Lf and IgE, it also opens the possibility of additional
quantitative test development.
Source and Availability of Raw Materials
There are a limited number of suppliers for raw materials that we
use to manufacture our products and product candidates and there
may be a need to assess alternate suppliers to prevent a possible
disruption of the manufacture of the materials necessary to produce
our product candidates for clinical trials, and if approved,
ultimately for commercial sale. We do not have any control over the
process or timing of the acquisition of these raw materials by
us.
We currently manufacture the majority of our preclinical and
Covid-19 testing materials in-house, and use contract manufacturers
for the manufacture of some of our product candidates. We may or
may not manufacture the products we develop, if any. Our internal
manufacturing and contract manufacturers are subject to extensive
governmental regulation.
In the dye eye segment, we either make our reagents or they are
sourced from select suppliers. We use contract manufacturers for
the manufacture of our assays and readers.
Government Regulation
Government authorities in the U.S. (including federal, state and
local authorities) and in other countries extensively regulate,
among other things, the manufacturing, research and clinical
development, marketing, labeling and packaging, storage,
distribution, post-approval monitoring and reporting, advertising
and promotion, export and import of pharmaceutical products, such
as those we are developing. 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. Moreover,
failure to comply with applicable regulatory requirements may
result in, among other things, warning letters, clinical holds,
civil or criminal penalties, recall or seizure of products,
injunction, disbarment, partial or total suspension of production
or withdrawal of the product from the market. Any agency or
judicial enforcement action could have a material adverse effect on
us.
Many, if not all of our customers, are covered entities under the
Health Insurance Portability and Accountability Act of August 1996
or HIPAA. As part of the operation of our business, we provide
reimbursement assistance to certain of our customers and as a
result we act in the capacity of a business associate with respect
to any patient-identifiable medical information, or PHI, we receive
in connection with these services. We and our customers must comply
with a variety of requirements related to the handling of patient
information, including laws and regulations protecting the privacy,
confidentiality and security of PHI. The provisions of HIPAA
require our customers to have business associate agreements with us
under which we are required to appropriately safeguard the PHI we
create or receive on their behalf. Further, we and our customers
are required to comply with HIPAA security regulations that require
us and them to implement certain administrative, physical and
technical safeguards to ensure the confidentiality, integrity and
availability of electronic PHI, or EPHI. We are required by
regulation and contract to protect the security of EPHI that we
create, receive, maintain or transmit for our customers consistent
with these regulations. To comply with our regulatory and
contractual obligations, we may have to reorganize processes and
invest in new technologies. We also are required to train personnel
regarding HIPAA requirements. If we, or any of our employees or
consultants, are unable to maintain the privacy, confidentiality
and security of the PHI that is entrusted to us, we and/or our
customers could be subject to civil and criminal fines and
sanctions and we could be found to have breached our contracts with
our customers. Under the Health Information Technology for Economic
and Clinical Health Act, or HITECH Act, and recent omnibus
revisions to the HIPAA regulations, we are directly subject to
HIPAA’s criminal and civil penalties for breaches of our privacy
and security obligations and are required to comply with security
breach notification requirements. The direct applicability of the
HIPAA privacy and security provisions and compliance with the
notification requirements requires us to incur additional costs and
may restrict our business operations.
U.S. Government Regulation
Government authorities in the United States and other countries
extensively regulate, among other things, the research,
development, testing, manufacture, labeling, promotion,
advertising, distribution and marketing of our product, which is a
medical device. In the United States, the FDA regulates medical
devices under the Federal Food, Drug, and Cosmetic Act and
implementing regulations. Failure to comply with the applicable FDA
requirements, both before and after approval, may subject us to
administrative and judicial sanctions, such as a delay in approving
or refusal by the FDA to approve pending applications, warning
letters, product recalls, product seizures, total or partial
suspension of production or distribution, injunctions,
administrative fines or criminal prosecution.
Unless exempted by regulation, medical devices may not be
commercially distributed in the United States until they have been
cleared or approved by the FDA. Medical devices are classified into
one of the three classes, Class I, II or III, on the basis of the
controls necessary to reasonably assure their safety and
effectiveness. Class II devices, which our two test for lactoferrin
and IgE are classified are subject to general controls, such as
labeling, pre-market notification and adherence to good
manufacturing practices. Laboratories or sites that perform our
tests need to have a CLIA certificate, be inspected, and must meet
the CLIA quality standards.
After a device receives 510(k) clearance, any modification to the
device that could significantly affect its safety or effectiveness,
or that would constitute a major change in its intended use, would
require a new 510(k) clearance or an approval of a Premarket
Approval, or PMA. A PMA is the FDA process of scientific or
regulatory review to evaluate the safety and effectiveness of Class
III medical devices which are those devices which support or
sustain human life, are of substantial importance in preventing
impairment of human health, or which present a potential,
unreasonable risk of illness or injury. Although the FDA requires
the manufacturer to make the initial determination regarding the
effect of a modification to the device that is subject to 510(k)
clearance, the FDA can review the manufacturer’s determination at
any time and require the manufacturer to seek another 510(k)
clearance or an approval of a PMA.
CLIA is intended to ensure the quality and reliability of clinical
laboratories in the United States by mandating specific standards
in the areas of personnel qualifications, administration, and
participation in proficiency testing, patient test management,
quality control, quality assurance and inspections. The regulations
promulgated under CLIA establish three levels of in
vitro diagnostic tests: (1) waiver; (2) moderately
complex; and (3) highly complex. The standards applicable to a
clinical laboratory depend on the level of diagnostic tests it
performs. A CLIA waiver is available to clinical laboratory test
systems if they meet certain requirements established by the
statute. Waived tests are simple laboratory examinations and
procedures employing methodologies that are so simple and accurate
as to render the likelihood of erroneous results negligible or to
pose no reasonable risk of harm to patients if the examinations or
procedures are performed incorrectly. These tests are waived from
regulatory oversight of the user other than the requirement to
follow the manufacturer’s labeling and directions for use. We
intend to file a waiver application with the FDA for the Axim Eye
System.
Regardless of whether a medical device requires FDA clearance or
approval, a number of other FDA requirements apply to the device,
its manufacturer and those who distribute it. Device manufacturers
must be registered and their products listed with the FDA, and
certain adverse events and product malfunctions must be reported to
the FDA. The FDA also regulates the product labeling, promotion
and, in some cases, advertising of medical devices. In addition,
manufacturers and their suppliers must comply with the FDA’s
quality system regulation which establishes extensive requirements
for quality and manufacturing procedures. Thus, suppliers,
manufacturers and distributors must continue to spend time, money
and effort to maintain compliance, and failure to comply can lead
to enforcement action. The FDA periodically inspects facilities to
ascertain compliance with these and other requirements.
Environmental Matters
No significant pollution or other types of hazardous emission
result from our current operations, and we do not anticipate that
our operations will be materially affected by federal, state or
local provisions concerning environmental controls. Our costs of
complying with environmental, health and safety requirements have
not been material. Furthermore, compliance with federal, state and
local requirements regulating the discharge of materials into the
environment, or otherwise relating to the protection of the
environment, have not had, nor are they expected to have, any
material effect on the capital expenditures, earnings or
competitive position of the Company. However, we will continue to
monitor emerging developments in this area.
Employees
As of April 12, 2022, we had six full-time employees and three
part-time employees. We also allow and utilize the services of
independent contractors. We will be considering the conversion of
some of our part-time employees to full-time positions. Management
believes that we have a good relationship with our employees.
Company Website
We maintain a corporate Internet website at: www.aximbiotech.com.
The contents of our website are not incorporated in or otherwise to
be regarded as part of this Annual Report on Form 10-K.
We file reports with the Securities and Exchange Commission
(“SEC”), which are available on our website free of charge. These
reports include annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, “Section 16” filings on
Form 3, Form 4, and Form 5, and other related filings, each of
which is provided on our website as soon as reasonably practical
after we electronically file such materials with or furnish them to
the SEC. In addition, the SEC maintains a website (www.sec.gov)
that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the
SEC, including the Company.
Item
1A. Risk Factors
Investing in our common stock involves a high degree of risk.
You should carefully consider the risks described below, as well as
the other information in this Annual Report on Form 10-K, including
our financial statements and the related notes and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations,” before deciding whether to invest in our common stock.
The occurrence of any of the events or developments described below
could harm our business, financial condition, operating results,
and growth prospects. In such an event, the market price of our
common stock could decline, and you may lose all or part of your
investment. Additional risks and uncertainties not presently known
to us or that we currently deem immaterial also may impair our
business operations.
Risk Factor Summary
Below is a summary of the principal factors that make an
investment in our common stock speculative or risky. This summary
does not address all of the risks that we face. Additional
discussion of the risks summarized in this risk factor summary, and
other risks that we face, can be found below and should be
carefully considered, together with other information included in
our December other filings with the Securities and Exchange
Commission.
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Even though the Axim Eye System has received all regulatory
approvals in the United States, it may never be successfully
commercialized.
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We
have incurred significant losses since inception and anticipate
that we will incur continued losses for the foreseeable future.
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We
will require substantial additional funding, which may not be
available to us on acceptable terms, if at all. If we fail to raise
the necessary additional capital, we may be unable to complete the
development and commercialization of our product candidates or
continue our development programs.
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Economic uncertainty and capital markets disruption, which has been
significantly impacted by geopolitical instability due to the
ongoing military conflict between Russia and Ukraine, could harm
our financial condition and results of operations.
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We
may be adversely affected by the effects of inflation.
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We
will face challenges in bringing Axim Eye System to market in the
United States and may not succeed in executing our business
plan.
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Our near-term success is highly dependent on the success of the
Axim Eye System, and we cannot be certain that it will be
successfully commercialized in the United States.
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Our business is subject to health care industry and government
cost-containment measures that could result in reduced sales of our
Axim Eye System.
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If
we are subject to regulatory enforcement action as a result of our
failure to comply with regulatory requirements, our commercial
operations would be harmed.
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If
we are unable to fully comply with federal and state “fraud and
abuse laws,” we could face substantial penalties, which may
adversely affect our business, financial condition and results of
operations.
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If
we fail to comply with contractual obligations and applicable laws
and regulations governing the handling of patient identifiable
medical information, we could suffer material losses or be
adversely affected by exposure to material penalties and
liabilities.
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We
may face future product liability claims.
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If
we do not introduce new commercially successful products in a
timely manner, our products may become obsolete over time,
customers may not buy our products and our revenue and
profitability may decline.
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We
rely on a limited number of suppliers of each of the key components
of the Axim Eye System and are vulnerable to fluctuations in the
availability and price of our suppliers’ products and services.
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We
face intense competition, and our failure to compete effectively
could have a material adverse effect on our results of
operations.
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The regulatory approval processes of the FDA, and comparable
foreign authorities are lengthy, time consuming and unpredictable,
and if we are ultimately unable to obtain regulatory approval for
our product candidates, our business will be substantially
harmed.
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We
may expend our limited resources to pursue a particular product,
product candidate or indication, and may fail to capitalize on
products, product candidates or indications that may be more
profitable or for which there is a greater likelihood of
success.
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Our product candidates may cause undesirable side effects or have
other properties that could delay or prevent their regulatory
approval, limit the commercial profile of an approved label, or
result in significant negative consequences following marketing
approval, if any.
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We
rely on third parties to conduct our preclinical and clinical
trials. If these third parties do not successfully perform their
contractual legal and regulatory duties or meet expected deadlines,
we may not be able to obtain regulatory approval for or
commercialize our product candidates and our business could be
substantially harmed.
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We
may not be able to manufacture our products or product candidates
in commercial quantities, which would prevent us from
commercializing our products and product candidates.
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With respect to SPX-009 and any of our product candidates for which
we may receive regulatory approvals, we will be subject to ongoing
obligations and continued regulatory review, which may result in
significant additional expense. Additionally, our product
candidates, if approved, could be subject to labeling and other
restrictions and market withdrawal and we may be subject to
penalties if we fail to comply with regulatory requirements or
experience unanticipated problems with our products.
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Our failure to successfully discover, acquire, develop and market
additional product candidates or approved products would impair our
ability to grow.
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Our commercial success depends upon us attaining significant market
acceptance of our product candidates, if approved for sale, among
ophthalmologists, physicians, patients, healthcare payors and major
operators of cancer and other clinics.
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Reimbursement may be limited or unavailable in certain market
segments for our product candidates, which could make it difficult
for us to sell our products profitably.
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Our collaborations depend upon the efforts of third parties to fund
and manage the development of many of our potential product
candidates, and failure of those third-party collaborators to
assist or share in the costs of product development could
materially harm our business, financial condition and results of
operations.
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If
we are unable to retain and recruit qualified scientists and
advisors, or if any of our key executives, key employees or key
consultants discontinues his or her employment or consulting
relationship with us, it may delay our development efforts or
otherwise harm our business. We will need to increase the size of
our company and may not effectively manage our growth.
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Drug development involves a lengthy and expensive process with an
uncertain outcome, and results of earlier studies and trials may
not be predictive of future trial results. Interim “top-line” and
preliminary data from our clinical trials that we announce or
publish from time to time may change as more patient data become
available and are subject to audit and verification procedures that
could result in material changes in the final data.
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We
may become involved in the future, in disputes and other legal or
regulatory proceedings that, if adversely decided or settled, could
materially and adversely affect our business, financial condition
and results of operations.
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We
have acquired, and may in the future acquire, assets, businesses
and technologies as part of our business strategy. If we acquire
companies or technologies in the future, they could prove difficult
to integrate, disrupt our business, dilute stockholder value, and
adversely affect our operating results and the value of our common
stock.
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Any acquisitions we make could disrupt our business and seriously
harm our financial condition.
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Our long-term success depends on intellectual property protection;
if our intellectual property rights are invalidated or
circumvented, our business will be adversely affected.
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If
any of our trade secrets, know-how or other proprietary information
is disclosed, the value of our trade secrets, know-how and other
proprietary rights would be significantly impaired and our business
and competitive position would suffer.
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Claims that we infringe upon the rights of third parties may give
rise to costly and lengthy litigation, and we could be prevented
from selling products, forced to pay damages, and defend against
litigation.
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If
we breach any of the agreements under which we license
commercialization rights to our product candidates from third
parties, we could lose license rights that are important to our
business.
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From time to time we may need to license patents, intellectual
property and proprietary technologies from third parties, which may
be difficult or expensive to obtain.
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The market price of our common stock may fluctuate significantly,
and investors in our common stock may lose all or a part of their
investment.
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Insiders have substantial influence over us and could delay or
prevent a change in corporate control.
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We
have never paid cash dividends and do not expect to pay cash
dividends in the foreseeable future. Any return on investment may
be limited to the value of our common stock.
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We
have issued preferred stock with designations, rights and
preferences that are superior to that of our common stock, and we
may issue additional shares of preferred stock in the future.
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Risks Related to Our Financial Position and Capital
Requirements
We are an early stage company subject to significant
risks and uncertainties, including the risk that we or our partners
may never develop, obtain regulatory approval or market certain of
our product candidates or generate product related
revenues.
We are primarily an early stage biotechnology company that began
operating in 2010, but did not commence research and development
activities with respect to our current business segments until in
2019 or later. Pharmaceutical product development is a highly
speculative undertaking and involves a substantial degree of risk.
There is no assurance that certain of our product candidates in
development will be suitable for diagnostic or therapeutic use, or
that we will be able to identify and isolate therapeutic product
candidates, or develop, market and commercialize these candidates.
We do not expect any of our oncology related product candidates in
development, including but not limited to SXP-009, to be
commercially available for a few years, if ever. Additionally, our
COVID-19 related product candidates, including our lateral flow
diagnostic test for SARS-CoV-2 neutralizing antibodies, are subject
to uncertainties relating to product development, regulatory
approval and commercialization, and further risks based on the
constantly evolving situation affecting the United States and the
international community. Even if we are able to commercialize our
oncology and/or COVID-19 related product candidates, there is no
assurance that these candidates would generate revenues or that any
revenues generated would be sufficient for us to become profitable
or thereafter maintain profitability
The Axim Eye System is currently our only FDA approved product. We
anticipate launching sales in the United States in the second or
third quarter of 2022 to those reference and physician operated
laboratories with Clinical Laboratory Improvement Act (“CLIA”)
Class II certifications. Although the Axim Eye System has received
all necessary regulatory approvals in the United States, it may
never be successfully commercialized. If the Axim Eye System or any
of our other products are not successfully commercialized, we may
not be able to generate revenue, become profitable or continue our
operations. Any failure of the Axim Eye System to be successfully
commercialized in the United States could have a material adverse
effect on our business, operating results, financial condition and
cash flows and could result in a substantial decline in the price
of our common stock.
We have incurred significant losses since inception and
anticipate that we will incur continued losses for the foreseeable
future.
As of December 31, 2021 and 2020, we had an accumulated deficit
related to our continuing operations of $57,882,227 and
$41,849,922, respectively. We continue to incur significant
research and development and other expenses related to our ongoing
operations. We have incurred operating losses since our inception,
expect to continue to incur significant operating losses for the
foreseeable future, and we expect these losses to increase as we:
(i) advance SPX-009 and our other product candidates, including our
COVID-19 related product candidates, into further clinical trials
and pursue other development, acquire, develop and manufacture
clinical trial materials and increase other regulatory operating
activities, (ii) conduct further studies for our COVID-19 related
product candidates, to advance to clinical trials and seek
regulatory approval; (iii) incur incremental expenses associated
with our efforts to further advance SPX-009 into preclinical
development activities, (iv) continue to identify and advance other
preclinical product candidates, (v) incur higher salary, lab supply
and infrastructure costs incurred in connection with supporting all
of our programs, (vi) expand our corporate, development and
manufacturing infrastructure, (viii) support our subsidiaries’,
including Sapphire’s, pre-clinical development and
commercialization efforts and (ix) the acquisition and further
development of the eye care tests. As such, we are subject to all
risks incidental to the development of new biopharmaceutical
products and related companion diagnostics, and we may encounter
unforeseen expenses, difficulties, complications, delays and other
unknown factors that may adversely affect our business. Our prior
losses, combined with expected future losses, have had and will
continue to have an adverse effect on our stockholders’ equity and
working capital.
We will require substantial additional funding, which
may not be available to us on acceptable terms, if at all. If we
fail to raise the necessary additional capital, we may be unable to
complete the development and commercialization of our product
candidates or continue our development programs.
Our operations have consumed substantial amounts of cash since
inception. We expect to significantly increase our spending to
advance the preclinical and clinical development of our product
candidates and launch and commercialize any product candidates for
which we may receive regulatory approval. We will require
additional capital for the further development and
commercialization of our product candidates, as well as to fund our
other operating expenses and capital expenditures.
As a result of our recurring losses from operations, recurring
negative cash flows from operations and substantial cumulative
losses, there is uncertainty regarding our ability to maintain
liquidity sufficient to operate our business effectively, which
raises substantial doubt about our ability to continue as a going
concern. If we are unsuccessful in our efforts to raise additional
capital, we may be required to significantly reduce or cease
operations. The report of our independent registered public
accounting firm on our audited financial statements for the years
ended December 31, 2021 and 2020 included a “going concern”
explanatory paragraph indicating that our recurring losses from
operations, negative working capital, recurring negative cash flows
from operations and substantial cumulative net losses raise
substantial doubt about our ability to continue as a going
concern.
We cannot be certain that additional funding will be available on
acceptable terms, if at all. If we are unable to raise additional
capital in sufficient amounts or on terms acceptable to us we may
have to significantly delay, scale back or discontinue the
development or commercialization of one or more of our product
candidates. We may also seek collaborators for one or more of our
current or future product candidates at an earlier stage than
otherwise would be desirable or on terms that are less favorable
than might otherwise be available. Any of these events could
significantly harm our business, financial condition and
prospects.
Our future capital requirements will depend on many factors,
including:
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the commercial acceptance of our two FDA cleared diagnostic tests
for dye eye disease
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the need to preform clinical studies for FDA clearance of our new
MMP-9 test
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the progress of the development of SPX-009 and our COVID-19 product
candidates;
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the number of product candidates we pursue;
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the time and costs involved in obtaining regulatory approvals;
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the costs involved in filing and prosecuting patent applications
and enforcing or defending patent claims;
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our plans to establish sales, marketing and/or manufacturing
capabilities;
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the effect of competing technological and market developments;
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the terms and timing of any collaborative, licensing and other
arrangements that we may establish;
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general market conditions for offerings from biopharmaceutical
companies;
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our ability to establish, enforce and maintain selected strategic
alliances and activities required for product
commercialization;
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our obligations under our debt arrangements;
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the time and costs involved in defending and enforcing our rights
in various litigation matters;
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the effect of the COVID-19 pandemic; and
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our revenues, if any, from successful development and
commercialization of our product candidates.
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In order to carry out our business plan and implement our strategy,
we anticipate that we will need to obtain additional financing from
time to time and may choose to raise additional funds through
strategic collaborations, licensing arrangements, joint ventures,
public or private equity or debt financing, asset sales, government
grants or other arrangements. We cannot be sure that any additional
funding, if needed, will be available on terms favorable to us, or
at all. Furthermore, any additional equity or equity-related
financing may be dilutive to our stockholders, and debt or equity
financing, if available, may subject us to restrictive covenants
and significant interest costs. If we obtain funding through a
strategic collaboration or licensing arrangement, we may be
required to relinquish our rights to certain of our product
candidates or marketing territories.
Our inability to raise capital when needed would harm our business,
financial condition and results of operations, and could cause our
stock price to decline or require that we wind down our operations
altogether.
We are currently operating in a period of economic
uncertainty and capital markets disruption, which has been
significantly impacted by geopolitical instability due to the
ongoing military conflict between Russia and Ukraine. Our business,
financial condition and results of operations could be materially
adversely affected by any negative impact on the global economy and
capital markets resulting from the conflict in Ukraine or any
other geopolitical tensions.
U.S. and global markets are experiencing volatility and disruption
following the escalation of geopolitical tensions and the start of
the military conflict between Russia and Ukraine. On February 24,
2022, a full-scale military invasion of Ukraine by Russian troops
was reported. Although the length and impact of the ongoing
military conflict is highly unpredictable, the conflict in
Ukraine could lead to market disruptions, including
significant volatility in commodity prices, credit and capital
markets, as well as supply chain interruptions. We are continuing
to monitor the situation in Ukraine and globally and assessing
its potential impact on our business.
Additionally, the recent military conflict in Ukraine has led to
sanctions and other penalties being levied by the United States,
European Union and other countries against Russia. Additional
potential sanctions and penalties have also been proposed and/or
threatened. Russian military actions and the resulting sanctions
could adversely affect the global economy and financial markets and
lead to instability and lack of liquidity in capital markets,
potentially making it more difficult for us to obtain additional
funds.
Although our business has not been materially impacted by the
ongoing military conflict between Russian and Ukraine to date, it
is impossible to predict the extent to which our operations, or
those of our suppliers and manufacturers, will be impacted in the
short and long term, or the ways in which the conflict may impact
our business. The extent and duration of the military action,
sanctions and resulting market disruptions are impossible to
predict, but could be substantial. Any such disruptions may also
magnify the impact of other risks described in this Annual
Report.
We may be adversely affected by the effects
of inflation.
Inflation has the potential to adversely affect our liquidity,
business, financial condition and results of operations by
increasing our overall cost structure. The existence
of inflation in the economy has resulted in, and may
continue to result in, higher interest rates and capital costs,
shipping costs, supply shortages, increased costs of labor,
weakening exchange rates and other similar effects. As a result
of inflation, we have experienced and may continue to
experience, cost increases. Although we may take measures to
mitigate the impact of this inflation, if these measures are
not effective our business, financial condition, results of
operations and liquidity could be materially adversely affected.
Even if such measures are effective, there could be a difference
between the timing of when these beneficial actions impact our
results of operations and when the cost inflation is
incurred.
Risks Related to Our Business and Industry
Our business may be subject to risks arising from
pandemic, epidemic, or an outbreak of diseases, such as the
outbreak of COVID-19.
If a pandemic, epidemic or outbreak of an infectious disease occurs
in the United States or elsewhere, our business may be adversely
affected.
COVID-19 has spread worldwide and has resulted in government
authorities implementing numerous measures to try to contain it,
such as travel bans and restrictions, quarantines, shelter-in-place
orders and shutdowns. These measures have impacted, and may further
impact, our workforce and operations, the operations of our
partners, and those of our suppliers. Our critical business
operations, including our headquarters, are located in regions
which have been impacted by COVID-19. Our suppliers and partners
have also been affected and may continue to be affected by COVID-19
related restrictions and closures.
The spread of COVID-19 has caused us to modify our business
practices as we comply with state mandated requirements for safety
in the workplace to ensure the health, safety and well-being of our
employees. These measures include personal protective equipment,
social distancing, cleanliness of the facilities and daily
monitoring of the health of employees in our facilities, as well as
modifying our policies on employee travel and the cancellation of
physical participation in meetings, events and conferences. We may
take further actions as required by government authorities or that
we determine are in the best interests of our employees, partners
and suppliers. However, we have not developed a specific and
comprehensive contingency plan designed to address the challenges
and risks presented by the COVID-19 pandemic and, even if and when
we do develop such a plan, there can be no assurance that such plan
will be effective in mitigating the potential adverse effects on
our business, financial condition and results of operations.
In addition, while the extent and duration of the COVID-19 pandemic
on the global economy and our business in particular is difficult
to assess or predict, the pandemic has resulted in, and may
continue to result in, significant disruption of global financial
markets, which may reduce our ability to access capital, which
could negatively affect our liquidity. A recession or financial
market correction resulting from the lack of containment and spread
of COVID-19 could impact overall technology spending, adversely
affecting demand for our products, our business and the value of
our common stock.
The ultimate impact of the COVID-19 pandemic or a similar health
epidemic is highly uncertain and subject to change. The extent of
the impact of the COVID-19 pandemic on our operational and
financial performance, including our ability to execute our
business strategies and initiatives in the expected time frame,
will depend on future developments, including, but not limited to,
the duration and continued spread of the pandemic, its severity,
the actions to contain the disease or treat its impact, further
related restrictions on travel, all of which are uncertain and
cannot be predicted. An extended period of economic disruption as a
result of the COVID-19 pandemic could have a material negative
impact on our business, results of operations, access to sources of
liquidity and financial condition, though the full extent and
duration is uncertain.
Management is actively monitoring the global situation on our
financial condition, liquidity, operations, suppliers, industry and
workforce. Given the daily evolution of the COVID-19 outbreak and
the global responses to curb its spread, we are not able to
estimate the effects of the COVID-19 outbreak on our results of
operations, financial condition or liquidity for fiscal year
2022.
We will face challenges in bringing the Axim Eye System
to market in the United States and may not succeed in executing our
business plan.
There are numerous risks and uncertainties inherent in the
development of new medical technologies. In addition to our
requirement for additional capital, our ability to bring the Axim
Eye System to market in the United States and to execute our
business plan successfully is subject to the following risks, among
others:
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Our clinical trials may not succeed. Clinical testing is expensive
and can take longer than originally anticipated. The outcomes of
clinical trials are uncertain, and failure can occur at any stage
of the testing. We could encounter unexpected problems, which could
result in a delay in efforts to complete clinical trials supporting
our commercialization efforts.
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The Axim Eye System is rated as CLIA Class II medical devise, which
requires our customers to be certified under CLIA requirements,
including certain parallel state requirements. If our customers are
unwilling or unable to comply with such requirements, it could have
an adverse effect on our ability to market the Axim Eye System in
the United States.
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Our suppliers and we will be subject to numerous FDA requirements
covering the design, testing, manufacturing, quality control,
labeling, advertising, promotion and export of the Axim Eye System
and other matters. If our suppliers or we fail to comply with these
regulatory requirements, the Axim Eye System could be subject to
restrictions or withdrawals from the market and we could become
subject to penalties.
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Even though we were successful in obtaining the sought-after FDA
approvals, we may be unable to commercialize the Axim Eye System
successfully in the United States. Successful commercialization
will depend on a number of factors, including, among other things,
achieving widespread acceptance of the Axim Eye System among
physicians, establishing adequate sales and marketing capabilities,
addressing competition effectively, the ability to obtain and
enforce patents to protect proprietary rights from use by would-be
competitors, key personnel retention and ensuring sufficient
manufacturing capacity and inventory to support commercialization
plans.
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Our business is subject to health care industry and
government cost-containment measures that could result in reduced
sales of our Axim Eye System.
We expect that most of our customers will rely on third-party
payers, including government programs and private health insurance
plans, to reimburse some or all of the cost of the procedures which
use our Axim Eye System. The continuing efforts of governmental
authorities, insurance companies, and other health care payers to
contain or reduce these costs could lead to patients being unable
to obtain approval for payment from these third-party payers. If
patients cannot obtain third-party payer payment approval, the use
of our Axim Eye System may decline significantly and our customers
may reduce or eliminate the use of our system. The cost-containment
measures that health care providers are instituting, both in the
U.S. and internationally, could harm our ability to operate
profitably. For example, managed care organizations successfully
negotiate volume discounts for medical products, may choose not to
reimburse certain products or reimburse products and a low amount
sometimes below our selling price. This could result in lower
prices to our customers from their customers and, in turn, reduce
the amounts we can charge our customers for our products.
In addition to general health care industry cost-containment, the
Centers for Medicare and Medicaid Services (“CMS”) released its
final rule implementing section 216(a) of the Protecting Access to
Medicare Act of 2014 (“PAMA”) that requires reporting entities to
report private payer rates paid to laboratories for tests,
which will be used to calculate Medicare payment rates. Reporting
entities, which are primarily certain qualifying customers in the
U.S. that derive a certain percentage and volume of their revenue
from laboratory tests from Medicare, report private payer rates for
our laboratory tests which will serve under the act as a baseline
for future reimbursement..
If we are subject to regulatory enforcement action as a
result of our failure to comply with regulatory requirements, our
commercial operations would be harmed.
Although we have received 510(k) clearance and for our Axim Eye
System, we are subject to significant ongoing regulatory
requirements, and if we fail to comply with these requirements, we
could be subject to enforcement action by the FDA or state
agencies, including:
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adverse publicity, warning letters, fines, injunctions, consent
decrees and civil penalties;
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repair, replacement, refunds, recall or seizure of our product;
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operating restrictions or partial suspension or total shutdown of
production;
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delay or refusal of our requests for 510(k) clearance or premarket
approval of new products or of new
intended uses or modifications to our existing product;
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refusal to grant export approval for our products;
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withdrawing 510(k) clearances, CLIA waiver or premarket approvals
that have already been granted; and
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criminal prosecution.
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If the government initiated any of these enforcement actions, our
business could be harmed.
We are required to demonstrate and maintain compliance with the
FDA’s Quality System Regulation, or the QSR. The QSR is a complex
regulatory scheme that covers the methods and documentation of the
design, testing, control, manufacturing, labeling, quality
assurance, packaging, storage and shipping of our products. The FDA
must determine that the facilities which manufacture and assemble
our products that are intended for sale in the United States, as
well as the manufacturing controls and specifications for these
products, are compliant with applicable regulatory requirements,
including the QSR. The FDA enforces the QSR through periodic
unannounced inspections. The FDA has not yet inspected our
facilities, and we cannot assure you that we will pass any future
FDA inspection. Our failure, or the failure of our suppliers, to
take satisfactory corrective action in response to an adverse QSR
inspection could result in enforcement actions, including a public
warning letter, a shutdown of our manufacturing operations, a
recall of our product, civil or criminal penalties or other
sanctions, which would significantly harm our available inventory
and sales and cause our business to suffer.
If we are unable to fully comply with federal and state
“fraud and abuse laws,” we could face substantial penalties, which
may adversely affect our business, financial condition and results
of operations.
We are subject to various laws pertaining to health care fraud and
abuse, including the U.S. Anti- Kickback Statute, physician
self-referral laws (the “Stark Law”), the U.S. False Claims Act,
the U.S. False Statements Statute, the Physician Payment Sunshine
Act, and state law equivalents to these U.S. federal laws, which
may not be limited to government-reimbursed items and may not
contain identical exceptions. Violations of these laws are
punishable by criminal and civil sanctions, including, in some
instances, civil and criminal penalties, damages, fines, exclusion
from participation in U.S. federal and state health care programs,
including Medicare and Medicaid, and the curtailment or
restructuring of operations. Any action against us for violation of
these laws could have a significant impact on our business. In
addition, we are subject to the U.S. Foreign Corrupt Practices Act.
Any action against us or our agents or distributors of this act
could have a significant impact on our business.
We may face future product liability
claims.
The testing, manufacturing, marketing and sale of therapeutic and
diagnostic products entail significant inherent risks of
allegations of product liability. Our use of the Axim Eye System
and/or any of our products that are currently in development and
commercial sale thereof could also expose us to liability claims.
All of such claims might be made directly by patients, health care
providers or others selling our products. We carry product
liability insurance to cover certain claims that could arise during
the commercial use of our products. We currently maintain product
liability insurance with aggregate annual coverage limits of $2.0
million. Such coverage, and any coverage obtained in the future,
may be inadequate to protect us in the event of successful product
liability claims, and we may not increase the amount of such
insurance coverage or even renew it. A successful product liability
claim could materially harm our business. In addition, substantial,
complex or extended litigation could result in the incurrence of
large expenditures and the diversion of significant resources.
If we do not introduce new commercially successful
products in a timely manner, our products may become obsolete over
time, customers may not buy our products and our revenue and
profitability may decline.
Demand for our products may change in ways we may not anticipate
because of:
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evolving customer needs;
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the introduction of new products and technologies; and
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evolving industry standards.
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Without the timely introduction of new commercially successful
products and enhancements, our products may become obsolete over
time, in which case our sales and operating results would suffer.
The success of our new product offerings will depend on several
factors, including our ability to:
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properly identify and anticipate customer needs;
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commercialize new products in a cost-effective and timely
manner;
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manufacture and deliver products in sufficient volumes on time;
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obtain and maintain regulatory approval for such new products;
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differentiate our offerings from competitors’ offerings;
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achieve positive clinical outcomes; and
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provide adequate medical and/or consumer education relating to new
products.
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Moreover, innovations generally will require a substantial
investment in research and development before we can determine the
commercial viability of these innovations and we may not have the
financial resources necessary to fund these innovations. In
addition, even if we successfully develop enhancements or new
generations of our products, these enhancements or new generations
of products may not produce revenue in excess of the costs of
development and they may be quickly rendered obsolete by changing
customer preferences or the introduction by our competitors of
products embodying new technologies or features.
We rely on a limited number of suppliers of each of the
key components of the Axim Eye System and are vulnerable to
fluctuations in the availability and price of our suppliers’
products and services.
We purchase each of the key components of the Axim Eye System from
a limited number of third-party suppliers. Our suppliers may not
provide the components or other products needed by us in the
quantities requested, in a timely manner or at a price we are
willing to pay. This is of particular concern currently due to
global supply chain and inflationary pressures that companies in
our fields have recently faced. In the event we are unable to renew
our agreements with our suppliers or they become unable or
unwilling to continue to provide important components in the
required volumes and quality levels or in a timely and cost
effective manner, or if regulations affecting the components
change, we may be required to identify and obtain acceptable
replacement supply sources. We may not be able to obtain
alternative suppliers or vendors on a timely basis, or at all,
which could disrupt or delay, or halt altogether, our ability to
manufacture or deliver the Axim Eye System or our other products
currently in development. If any of these events should occur, our
business, financial condition, cash flows and results of operations
could be materially adversely affected.
We face intense competition, and our failure to compete
effectively could have a material adverse effect on our results of
operations.
We face intense competition in the markets for ophthalmic products
and these markets are subject to rapid and significant
technological change. We have numerous potential competitors in the
United States and abroad. We face potential competition from
industry participants marketing conventional technologies for the
measurement of dre eye and other in-lab-testing technologies, and
commercially available methods, such as the Schirmer Test and
ocular surface staining. Many of our potential competitors have
substantially more resources and a greater marketing scale than we
do. If we are unable to develop and produce or market our products
to effectively compete against our competitors, our operating
results will materially suffer.
We are heavily dependent on the success of our
technologies and product candidates, and we cannot give any
assurance that certain of our product candidates will receive
regulatory approval, which is necessary before such products can be
commercialized, or that we will be able to successfully
commercialize those products that we have secured regulatory
approval for or do not need further regulatory approval
for.
To date, we have invested a significant portion of our efforts and
financial resources in the acquisition and development of our
product candidates. As an early stage biotechnology company that
has recently made significant changes to its operations, we have
limited experience and have not yet demonstrated an ability to
successfully overcome many of the risks and uncertainties
frequently encountered by companies in new and rapidly evolving
fields, particularly in the biopharmaceutical area. Our future
success is substantially dependent on our ability to successfully
develop, obtain regulatory approval for (to the extent required),
and then successfully commercialize our product candidates.
Although we have secured FDA approval of our Axim Eye System, many
of our product candidates are currently in preclinical development
or in clinical trials. Our business depends entirely on the
successful development and commercialization of our product
candidates, which may never occur. We currently do not generate
revenues from sales of any products, and we may not be able to
develop or successfully commercialize our product candidates.
The successful development, and any commercialization, of our
technologies and any product candidates would require us to
successfully perform a variety of functions, including:
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seeking and obtaining intellectual property and/or proprietary
rights to our technology and/or the technology of others;
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identifying, developing, manufacturing and commercializing product
candidates;
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entering into successful licensing and other arrangements with
product development partners;
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participating in regulatory approval processes, to the extent
required;
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formulating and manufacturing products; and
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conducting sales and marketing activities.
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Certain of our product candidates will require additional
preclinical or clinical development; management of preclinical,
clinical and manufacturing activities; regulatory approval in
multiple jurisdictions; obtaining manufacturing supply; building of
a commercial organization; and significant marketing efforts before
we generate any revenues from product sales. We are not permitted
to market or promote any of our product candidates before we
receive regulatory approval from the FDA, or comparable foreign
regulatory authorities, and we may never receive such regulatory
approval for such product candidates. In addition, certain of our
product development programs contemplate the development of
companion diagnostics. Companion diagnostics are subject to
regulation as medical devices and must themselves be approved for
marketing by the FDA, or certain other foreign regulatory agencies
before we may commercialize our product candidates.
There can be no assurance that the product candidates
we and our partners are developing for the detection of COVID-19
neutralizing antibodies will be granted an Emergency Use
Authorization by the FDA. If no Emergency Use Authorization is
granted or, once granted, it is terminated, we will be unable to
sell our product candidates in the near future and will be required
to pursue the drug approval process, which is lengthy and
expensive.
On September 15, 2020, we announced the initial submission of an
Emergency Use Authorization (“EUA”) to the FDA for our lateral flow
diagnostic test kit for the detection of neutralizing antibodies in
sera/plasma of patients who had previously had the SARS-CoV-2
virus. On December 15, 2020, we announced the submission of an
amendment of the original EUA with additional testing data for our
rapid diagnostic test.
On March 24, 2021, our manufacturing partner Empowered Diagnostics
announced the initial submission of an EUA to the FDA for
Immunopass, our rapid point-of-care lateral flow diagnostic test
kit for the detection of neutralizing antibodies in whole blood of
patients.
On January 2022, the FDA notified us that the priorities for
testing had changed in favor of quantitative measurement of
neutralizing antibodies Accordingly, the Company’s EUA for the
qualitative test would no longer be considered.
We may also seek additional EUAs from the FDA for our other product
candidates for the detection of antibodies and/or treatment of
COVID-19 and the SARS-CoV-2 virus. If granted, the additional EUAs
would allow us to market and sell additional product candidates
without the need to pursue the lengthy and expensive drug approval
process. There is no guarantee that we will be able to obtain any
additional EUAs. Failure to obtain additional EUAs or the
termination of such EUAs, if obtained, could adversely impact our
business, financial condition and results of operations.
The Company is currently trying to sell the neutralizing antibody
test for Research Use Only, which does not require FDA approval
The regulatory approval processes of the FDA and
comparable foreign authorities are lengthy, time consuming and
inherently unpredictable, and if we are ultimately unable to obtain
regulatory approval for our product candidates, our business will
be substantially harmed.
The time required to obtain approval from the FDA and comparable
foreign authorities is unpredictable, but typically takes many
years following the commencement of 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. We have not obtained
regulatory approval our cancer and COVID-19 related product
candidates, and it is possible that none these candidates or any
product candidates we may seek to develop in the future will ever
obtain regulatory approval. We have acquired the intellectual
property and the exclusive global rights to market two FDA approved
lateral flow assays which utilize a non-invasive, quantitative,
point of care human tear test to aid in the diagnosis and selection
of therapeutics for the treatment of eye diseases.
We may fail to receive regulatory approval for our product
candidates for many reasons, including the following:
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the FDA or comparable foreign regulatory authorities may disagree
with the design or implementation of our clinical trials;
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we
may be unable to demonstrate to the satisfaction of the FDA or
comparable foreign regulatory authorities that a product candidate
is safe and effective for its proposed indication;
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the results of clinical trials may not meet the level of
statistical significance required for approval by the FDA or
comparable foreign regulatory authorities;
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the FDA or comparable foreign regulatory authorities may disagree
with our interpretation of data from preclinical studies or
clinical trials;
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the data collected from clinical trials of our product candidates
may not be sufficient to support the submission of a new drug
application (“NDA”), a marketing authorization application (“MAA”)
or other submission or to obtain regulatory approval in the U.S.,
or elsewhere;
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the data obtained from studies in one jurisdiction, such as the
United States, may not be accepted by regulatory authorities in
other jurisdictions, and certain jurisdictions may require data
from studies conducted in their country in order to obtain
regulatory approval;
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the FDA or comparable foreign regulatory authorities may fail to
approve the manufacturing processes or facilities of third-party
manufacturers with which we contract for clinical and commercial
supplies;
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the FDA or comparable foreign regulatory authorities may fail to
approve the companion diagnostics we contemplate developing with
partners; and
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the approval policies or regulations of the FDA or comparable
foreign regulatory authorities may significantly change in a manner
rendering our clinical data insufficient for approval.
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This lengthy approval process as well as the unpredictability of
future clinical trial results may result in our failing to obtain
regulatory approval to market our product candidates, which would
significantly harm our business, results of operations and
prospects.
Our product candidates may not receive regulatory approval even if
our clinical trials are successful. If we do not receive regulatory
approvals for our product candidates, we may not be able to
continue our operations. Even if we successfully obtain regulatory
approvals to market one or more of our product candidates, our
revenues will be dependent, in some instances, upon our
collaborators’ ability to obtain regulatory approval of the
companion diagnostics to be used with our product candidates, as
well as the size of the markets in the territories for which we
gain regulatory approval and have commercial rights. If the markets
for patients that we are targeting for our product candidates are
not as significant as we estimate, we may not generate significant
revenues from sales of such products, if approved.
With respect to any of our product candidates for which
we may receive regulatory approvals, we will be subject to ongoing
obligations and continued regulatory review, which may result in
significant additional expense. Additionally, our product
candidates, if approved, could be subject to labeling and other
restrictions and market withdrawal and we may be subject to
penalties if we fail to comply with regulatory requirements or
experience unanticipated problems with our
products.
Any FDA approval and any other regulatory approvals that we may
receive for our product candidates may be subject to limitations on
the approved indicated uses for which the product may be marketed
or to the conditions of approval, or contain requirements for
potentially costly post-marketing testing, including Phase I, II,
II and IV clinical trials, and surveillance to monitor the safety
and efficacy of the product candidate. In addition, if the FDA or a
comparable foreign regulatory authority approves any of our product
candidates, the manufacturing processes, labeling, packaging,
distribution, adverse event reporting, storage, advertising,
promotion and recordkeeping for the product will be subject to
extensive and ongoing regulatory requirements. These requirements
include submissions of safety and other post-marketing information
and reports, registration, as well as continued compliance with
cGMPs and cGCPs for any clinical trials that we conduct
post-approval. The future discovery of previously unknown problems
with a product, including adverse events of unanticipated severity
or frequency, or with our third-party manufacturers or
manufacturing processes, or failure to comply with regulatory
requirements, may result in, among other things:
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restrictions on the marketing or manufacturing of the product,
withdrawal of the product from the market, or voluntary or
mandatory product recalls;
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fines, warning letters or holds on clinical trials;
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refusal by the FDA to approve pending applications or supplements
to approved applications filed by us, or suspension or revocation
of product license approvals;
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product seizure or detention, or refusal to permit the import or
export of products; and
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injunctions or the imposition of civil or criminal penalties.
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The FDA’s policies may change, and additional government
regulations may be enacted that could prevent, limit or delay
regulatory approval of our product candidates. If we are slow or
unable to adapt to changes in existing requirements or the adoption
of new requirements or policies, or if we are not able to maintain
regulatory compliance, we may lose any marketing approval that we
may have obtained, which would adversely affect our business,
prospects and ability to achieve or sustain profitability.
We will need to obtain FDA approval of any proposed
product brand names, and any failure or delay associated with such
approval may adversely impact our business.
A pharmaceutical product cannot be marketed in the U.S. or other
countries until we have completed rigorous and extensive regulatory
review processes, including approval of a brand name. Any brand
names we intend to use for our product candidates will require
approval from the FDA regardless of whether we have secured a
formal trademark registration from the U.S. Patent and Trademark
Office (the “PTO”). The FDA typically conducts a review of proposed
product brand names, including an evaluation of potential for
confusion with other product names. The FDA may also object to a
product brand name if it believes the name inappropriately implies
medical claims. If the FDA objects to any of our proposed product
brand names, we may be required to adopt an alternative brand name
for our product candidates. If we adopt an alternative brand name,
we would lose the benefit of our existing trademark applications
for such product candidate and may be required to expend
significant additional resources in an effort to identify a
suitable product brand name that would qualify under applicable
trademark laws, not infringe the existing rights of third parties
and be acceptable to the FDA. We may be unable to build a
successful brand identity for a new trademark in a timely manner or
at all, which would limit our ability to commercialize our product
candidates.
Our approach to the discovery and development of
product candidates that target Nabs is unproven, and we do not know
whether we will be able to develop any products of commercial
value.
Diagnostic products targeting Nabs are emerging technologies and,
consequently, it is conceivable that such technologies may
ultimately fail to identify commercially viable products to treat
human patients. Due to the unproven nature of Nabs, significant
further research and development activities will be required. We
may incur substantial costs in connection with such research and
development activities and there is no guarantee that these
activities will lead to the identification of commercially viable
products.
We may expend our limited resources to pursue a
particular product, product candidate or indication and fail to
capitalize on products, product candidates or indications that may
be more profitable or for which there is a greater likelihood of
success.
We are currently advancing product candidates for cancer, eye
health and COVID-19. Simultaneously advancing more than one product
candidates creates a significant strain on our limited human and
financial resources. As a result, we may not be able to provide
sufficient resources to any single product candidate to permit the
successful development and commercialization of such product
candidate, causing material harm to our business. Our resource
allocation decisions may cause us to fail to capitalize on viable
commercial products or profitable market opportunities. Our
spending on current and future research and development programs
and product candidates for specific indications may not yield any
commercially viable products.
If, due to our limited resources and access to capital, we
prioritize development of certain product candidates that
ultimately prove to be unsuccessful, we may forego or delay pursuit
of opportunities with other product candidates or for other
indications that later prove to have greater commercial potential
or a greater likelihood of success. Our resource allocation
decisions may cause us to fail to capitalize on viable commercial
products or profitable market opportunities.
Our product candidates may cause undesirable side
effects or have other properties that could delay or prevent their
regulatory approval or result in significant negative consequences
following marketing approval, if any.
Undesirable side effects caused by our product candidates could
cause us or regulatory authorities to interrupt, delay or halt
clinical trials and could result in a more restrictive label or the
delay or denial of regulatory approval by the FDA or other
comparable foreign authorities. Results of our trials could reveal
a high and unacceptable severity and prevalence of these or other
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 product candidates for any or all targeted
indications. The drug-related side effects could affect patient
recruitment or the ability of enrolled patients to complete the
trial or result in potential product liability claims. Any of these
occurrences may harm our business, financial condition and
prospects significantly.
Additionally, if we receive marketing approval for one or more of
our product candidates, and we or others later identify undesirable
side effects caused by such products, a number of potentially
significant negative consequences could result, including:
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regulatory authorities may withdraw approvals of such products;
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regulatory authorities may require additional warnings on the
label;
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we
may be required to create a medication guide outlining the risks of
such side effects for distribution to patients;
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we
could be sued and held liable for harm caused to 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 the particular product candidate or for
particular indications of a product candidate, if approved, and
could significantly harm our business, results of operations and
prospects.
We will rely on third parties to conduct our
preclinical and clinical trials. If these third parties do not
successfully perform their contractual legal and regulatory duties
or meet expected deadlines, we may not be able to obtain regulatory
approval for or commercialize our product candidates and our
business could be substantially harmed.
We have relied upon and plan to continue to rely upon third-party
contract research organizations (“CROs”) to monitor and manage data
for our ongoing preclinical and clinical programs. We rely on these
parties for execution of our preclinical and clinical trials, and
control only certain aspects of their activities. Nevertheless, we
are responsible for ensuring that each of our studies is conducted
in accordance with the applicable protocol, legal, regulatory and
scientific standards, and our reliance on the CROs does not relieve
us of our regulatory responsibilities. We and our CROs are required
to comply with current good clinical practices (“cGCP”), which are
regulations and guidelines enforced by the FDA, the Competent
Authorities of the Member States of the European Economic Area, and
comparable foreign regulatory authorities for all of our product
candidates in clinical development.
Regulatory authorities enforce these cGCPs through periodic
inspections of trial sponsors, principal investigators and trial
sites. If we or any of our CROs fail to comply with applicable
cGCPs, 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 marketing applications or may not approve our
marketing 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 cGCP
regulations. In addition, our clinical trials must be conducted
with product produced under current good manufacturing practices
(“cGMP”) regulations. Our failure to comply with these regulations
may require us to repeat clinical trials, which would delay the
regulatory approval process.
If any of our relationships with these third-party CROs terminate,
we may not be able to enter into arrangements with alternative CROs
or to do so on commercially reasonable terms. In addition, our CROs
are not our employees, and except for remedies available to us
under our agreements with such CROs, we cannot control whether or
not they devote sufficient time and resources to our on-going
clinical, nonclinical and preclinical programs. If CROs do not
successfully carry out their contractual duties or obligations or
meet expected deadlines, if they need to be replaced 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 product
candidates. As a result, our results of operations and the
commercial prospects for our product candidates would be harmed,
our costs could increase and our ability to generate revenues could
be delayed.
Switching or adding additional CROs involves additional cost and
requires management time and focus. In addition, there is a natural
transition period when a new CRO commences work. As a result,
delays occur, which can materially impact our ability to meet our
desired clinical development timelines. Though we carefully manage
our relationships with our CROs, there can be no assurance that we
will not encounter similar 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.
If we fail to comply with manufacturing regulations,
our financial results and financial condition will be adversely
affected.
We currently manufacture some of our preclinical materials
in-house. In addition, we may enter into collaboration and license
agreements with certain collaborators, pursuant to which we may,
among other things, agree to carry out manufacturing of our
collaborators’ material and product candidates. However, we only
recently began manufacturing such materials and do not have
significant prior experience manufacturing preclinical or product
candidates. Before we can begin commercial manufacture of our or
any potential collaborators’ materials or product candidates,
regulatory authorities must approve marketing applications that
identify manufacturing facilities operated by us or our contract
manufacturers that have passed regulatory inspection and
manufacturing processes that are acceptable to the regulatory
authorities.
Due to the complexity of the processes used to manufacture our
product candidates and our potential collaborators’ product
candidates, we may be unable to continue to pass or initially pass
federal or international regulatory inspections in a cost-effective
manner. For the same reason, any potential third-party manufacturer
of our product candidates may be unable to comply with cGMP
regulations in a cost-effective manner and may be unable to
initially or continue to pass a federal or international regulatory
inspection.
If we, or third-party manufacturers with whom we contract, are
unable to comply with manufacturing regulations, we may be subject
to delay of approval of our product candidates, warning or untitled
letters, fines, unanticipated compliance expenses, recall or
seizure of our products, total or partial suspension of production
and/or enforcement actions, including injunctions, and criminal or
civil prosecution. These possible sanctions would adversely affect
our financial results and financial condition.
The manufacture of pharmaceutical products requires significant
expertise and capital investment, including the development of
advanced manufacturing techniques and process controls.
Manufacturers of pharmaceutical products often encounter
difficulties in production, which include difficulties with
production costs and yields, quality control and assurance and
shortages of qualified personnel, as well as compliance with
strictly enforced federal, state and foreign regulations. The
third-party manufacturers we may contract with may not perform as
agreed or may terminate their agreements with us. Any of these
factors could cause us to delay or suspend any future clinical
trials, regulatory submissions, required approvals or
commercialization of one or more of our drug candidates, entail
higher costs and result in our being unable to effectively
commercialize products.
Material necessary to manufacture product candidates
may not be available on commercially reasonable terms, or at all,
which may delay the development and commercialization of product
candidates.
There are a limited number of suppliers for raw materials that we
use to manufacture our products and product candidates and there
may be a need to assess alternate suppliers to prevent a possible
disruption of the manufacture of the materials necessary to produce
our product candidates for clinical trials, and if approved,
ultimately for commercial sale. We do not have any control over the
process or timing of the acquisition of these raw materials by us.
We typically do not have any agreements for the commercial
production of these raw materials. Any significant delay in the
supply of a product candidate, or the raw material components
thereof, for an ongoing clinical trial due to the need to obtain or
replace a third-party manufacturer could considerably delay
completion of our clinical trials, product testing and potential
regulatory approval of our product candidates. If we are unable to
purchase these raw materials after regulatory approval has been
obtained for our product candidates, the commercial launch of our
product candidates would be delayed or there would be a shortage in
supply, which would impair our ability to generate revenues from
the sale of our product candidates.
We may not be able to manufacture our products or
product candidates in commercial quantities, which would prevent us
from commercializing our products and product
candidates.
We are largely dependent on our third-party manufacturers to
conduct process development and scale-up work necessary to support
greater clinical development and commercialization requirements for
our products and product candidates. Carrying out these activities
in a timely manner, and on commercially reasonable terms, is
critical to the successful development and commercialization of our
products and product candidates. We expect our third-party
manufacturers are capable of providing sufficient quantities of our
products and product candidates to meet anticipated clinical and
full-scale commercial demands; however, if third parties with whom
we currently work are unable to meet our supply requirements, we
will need to secure alternate suppliers or face potential delays or
shortages. While we believe that there are other contract
manufacturers with the technical capabilities to manufacture our
products and product candidates, we cannot be certain that
identifying and establishing relationships with such sources would
not result in significant delay or material additional costs.
If we are unable to successfully commercialize our
products, our business, financial condition and results of
operations will be materially and adversely
affected.
We currently are currently building our sales and marketing
organization. We currently anticipate that,we may rely on third
parties to sell our product candidates in the U.S. and/or in
international markets. If we enter into arrangements with third
parties to sell and market our products, we would likely receive
less revenue than if we sold our products directly. In addition,
although we would intend to use due diligence in monitoring the
activities of our third-party sales and marketing partners, we may
have little or no control over the sales efforts of those third
parties. In the event we are unable to develop our own sales force
or collaborate with third parties to sell our product candidates,
we may not be able to successfully commercialize our product
candidates, which would negatively impact our ability to generate
revenue. In the event that we elect to market our own products, we
will also have to compete with other pharmaceutical and
biotechnology companies to recruit, hire and train sales and
marketing personnel.
Our failure to successfully discover, acquire, develop
and market additional product candidates or approved products would
impair our ability to grow.
As part of our growth strategy, we intend to develop and market
additional products and product candidates. We are pursuing various
therapeutic opportunities through our product pipeline. We may
spend several years completing our development of any particular
current or future internal product candidate, and failure can occur
at any stage. The product candidates to which we allocate our
resources may not end up being successful. In addition, because our
internal research capabilities are limited, we may be dependent
upon pharmaceutical and biotechnology companies, academic
scientists and other researchers to sell or license products or
technology to us. The success of this strategy depends partly upon
our ability to identify, select, discover and acquire promising
pharmaceutical product candidates and products. Failure of this
strategy would impair our ability to grow.
The process of proposing, negotiating and implementing a license or
acquisition of a product candidate or approved product is lengthy
and complex. Other companies, including some with substantially
greater financial, marketing and sales resources, may compete with
us for the license or acquisition of product candidates and
approved products. We have limited resources to identify and
execute the acquisition or in-licensing of third-party products,
businesses and technologies and integrate them into our current
infrastructure. Moreover, we may devote resources to potential
acquisitions or in-licensing opportunities that are never
completed, or we may fail to realize the anticipated benefits of
such efforts. We may not be able to acquire the rights to
additional product candidates on terms that we find acceptable, or
at all.
In addition, future acquisitions may entail numerous operational
and financial risks, including:
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disruption of our business and diversion of our management’s time
and attention to develop acquired products or technologies;
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incurrence of substantial debt, dilutive issuances of securities or
depletion of cash to pay for acquisitions;
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higher than expected acquisition and integration costs;
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difficulty in combining the operations and personnel of any
acquired businesses with our operations and personnel;
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increased amortization expenses;
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impairment of relationships with key suppliers or customers of any
acquired businesses due to changes in management and ownership;
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impairment of our ability to obtain intellectual property rights or
rights to commercialize additional product candidates, or increased
cost to obtain such rights;
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inability to motivate key employees of any acquired businesses;
and
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assumption of known and unknown liabilities.
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Further, any product candidate that we acquire may require
additional development efforts prior to commercial sale, including
extensive clinical testing and approval by the FDA and applicable
foreign regulatory authorities. All product candidates are prone to
risks of failure typical of pharmaceutical product development,
including the possibility that a product candidate will not be
shown to be sufficiently safe and effective for approval by
regulatory authorities.
Our commercial success depends upon us attaining
significant market acceptance of our product candidates, if
approved for sale, among physicians, patients, healthcare payors
and major operators of cancer and other clinics.
Even if we obtain regulatory approval for our product candidates,
the product may not gain market acceptance among ophthalmologists,
physicians, health care payors, patients and the medical community,
which are critical to commercial success. Market acceptance of any
product candidate for which we receive approval depends on a number
of factors, including:
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the efficacy and safety as demonstrated in clinical trials;
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the timing of market introduction of such product candidate as well
as competitive products;
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the clinical indications for which the product candidate is
approved;
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acceptance by ophthalmologists, physicians, major operators of
cancer clinics and patients of the product candidate as a safe and
effective treatment;
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the safety of such product candidate seen in a broader patient
group, including its use outside the approved indications;
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the availability, cost and potential advantages of alternative
treatments, including less expensive generic drugs;
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the availability of adequate reimbursement and pricing by
third-party payors and government authorities;
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the product labeling or product insert required by the FDA or
regulatory authority in other countries;
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the approval, availability, market acceptance and reimbursement for
a companion diagnostic, if any;
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the prevalence and severity of adverse side effects; and
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the effectiveness of our sales and marketing efforts.
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If any product candidate that we develop does not provide a
treatment regimen that is as beneficial as, or is perceived as
being as beneficial as, the current standard of care or otherwise
does not provide patient benefit, that product candidate, if
approved for commercial sale by the FDA or other regulatory
authorities, likely will not achieve market acceptance. Our ability
to effectively promote and sell any approved products will also
depend on pricing and cost-effectiveness, including our ability to
produce a product at a competitive price and our ability to obtain
sufficient third-party coverage or reimbursement. If any product
candidate is approved but does not achieve an adequate level of
acceptance by ophthalmologists, physicians, patients and
third-party payors, our ability to generate revenues from that
product would be substantially reduced. In addition, our efforts to
educate the medical community and third-party payors on the
benefits of our product candidates may require significant
resources, may be constrained by FDA rules and policies on product
promotion, and may never be successful.
If we cannot compete successfully against other
biotechnology and pharmaceutical companies, we may not be
successful in developing and commercializing our technology and our
business will suffer.
The biotechnology and pharmaceutical industries are characterized
by intense competition and rapid technological advances, both in
the U.S. and internationally. In addition, the competition in the
COVID-19 diagnostics and oncology markets, and other relevant
markets, is intense. Even if we are able to develop our product
candidates, each will compete with a number of existing and future
product candidates developed, manufactured and marketed by others.
Specifically, we will compete against fully integrated
pharmaceutical companies and smaller companies that are
collaborating with larger pharmaceutical companies, academic
institutions, government agencies and other public and private
research organizations. Many of these competitors have validated
technologies with products already FDA-approved or in various
stages of development. In addition, many of these competitors,
either alone or together with their collaborative partners, operate
larger research and development programs and have substantially
greater financial resources than we do, as well as significantly
greater experience in:
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developing product candidates and technologies generally;
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undertaking preclinical testing and clinical trials;
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obtaining FDA and other regulatory approvals of product
candidates;
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formulating and manufacturing product candidates; and
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launching, marketing and selling product candidates.
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Many of our competitors have substantially greater financial,
technical and other resources, such as larger research and
development staff and experienced marketing and manufacturing
organizations. Additional mergers and acquisitions in the
biotechnology and pharmaceutical industries may result in even more
resources being concentrated in our competitors. As a result, these
companies may obtain regulatory approval more rapidly than we are
able and may be more effective in selling and marketing their
products as well. Smaller or early-stage pharmaceutical companies
may also prove to be significant competitors, particularly through
collaborative arrangements with large, established companies.
Competition may increase further as a result of advances in the
commercial applicability of technologies and greater availability
of capital for investment in these industries. Our competitors may
succeed in developing, acquiring or licensing on an exclusive basis
drug products that are more effective or less costly than any drug
candidate that we are currently developing or that we may develop.
If approved, our product candidates will face competition from
commercially available drugs as well as drugs that are in the
development pipelines of our competitors and later enter the
market.
Established pharmaceutical companies may invest heavily to
accelerate discovery and development of novel compounds or to
in-license novel compounds that could make our product candidates
less competitive. In addition, any new product that competes with
an approved product must demonstrate compelling advantages in
efficacy, convenience, tolerability and safety in order to overcome
price competition and to be commercially successful. Accordingly,
our competitors may succeed in obtaining patent protection,
receiving FDA or other regulatory approval or discovering,
developing and commercializing medicines before we do, which would
have a material adverse impact on our business. If our technologies
fail to compete effectively against third party technologies, our
business will be adversely impacted.
We expect that our ability to compete effectively will depend upon
our ability to:
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successfully and efficiently complete clinical trials and submit
for and obtain all requisite regulatory approvals in a
cost-effective manner;
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obtain and maintain a proprietary position for our products and
manufacturing processes and other related product technology;
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attract and retain key personnel;
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develop relationships with physicians prescribing these products;
and
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build an adequate sales and marketing infrastructure for our
product candidates.
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Because we will be competing against significantly larger companies
with established track records, we will have to demonstrate that,
based on experience, clinical data, side-effect profiles and other
factors, our product candidates, if approved, are competitive with
other products.
Healthcare reform measures could hinder or prevent our
product candidates’ commercial success.
In both the U.S. and certain foreign jurisdictions, there have
been, and we expect there will continue to be, a number of
legislative and regulatory changes to the health care system that
could impact our ability to sell our products profitably. The U.S.
government and other governments have shown significant interest in
pursuing healthcare reform. In particular, the Medicare
Modernization Act of 2003 revised the payment methodology for many
products under the Medicare program in the U.S. This has resulted
in lower rates of reimbursement. In 2010, the Patient Protection
and Affordable Care Act, as amended by the Health Care and
Education Reconciliation Act (collectively, the “Healthcare Reform
Law”), was enacted. The Healthcare Reform Law substantially changed
the way healthcare is financed by both governmental and private
insurers. Such government-adopted reform measures may adversely
impact the pricing of healthcare products and services in the U.S.
or internationally and the amount of reimbursement available from
governmental agencies or other third-party payors.
There have been, and likely will continue to be, legislative and
regulatory proposals at the federal and state levels directed at
broadening the availability of healthcare and containing or
lowering the cost of healthcare. For example, there have been
public announcements by members of the U.S. Congress regarding
their plans to repeal and replace the Healthcare Reform Law and
Medicare, and the Biden administration has announced plans to amend
and expand the scope of the Healthcare Reform Law. Although we
cannot predict the ultimate content or timing of any healthcare
reform legislation, potential changes resulting from any amendment,
repeal, replacement or expansion of these programs, including any
reduction in the future availability of healthcare insurance
benefits, could adversely affect our business and future results of
operations. The continuing efforts of the government, insurance
companies, managed care organizations and other payors of
healthcare services to contain or reduce costs of healthcare may
adversely affect the demand for any product candidates for which we
may obtain regulatory approval, as well as our ability to set
satisfactory prices for our products, to generate revenues, and to
achieve and maintain profitability.
Failure to successfully validate, develop and obtain
regulatory approval for companion diagnostics could harm our
long-term development strategy.
As one of the key elements of our clinical development strategy, we
seek to identify patients within a disease category or indication
who may derive selective and meaningful benefit from the product
candidates we are developing. As such, we plan to develop, or
partner with third parties to develop, companion diagnostics to
help us to more accurately identify patients within a particular
category or indication, both during our clinical trials and in
connection with the commercialization of certain of our product
candidates.
Companion diagnostics are subject to regulation by the FDA and
comparable foreign regulatory authorities as medical devices and
require separate regulatory approval prior to commercialization. We
and our collaborators may encounter difficulties in developing and
obtaining approval for the companion diagnostics, including issues
relating to selectivity/specificity, analytical validation,
reproducibility or clinical validation. Any delay or failure by our
collaborators to develop or obtain regulatory approval of the
companion diagnostics could delay or prevent approval of our
product candidates. In addition, our collaborators may encounter
production difficulties that could constrain the supply of the
companion diagnostics, and both they and we may have difficulties
gaining acceptance of the use of the companion diagnostics in the
clinical community. If such companion diagnostics fail to gain
market acceptance, it would have an adverse effect on our ability
to derive revenues from sales of our products. In addition, any
diagnostic company with whom we contract may decide to discontinue
selling or manufacturing the companion diagnostic that we
anticipate using in connection with development and
commercialization of our product candidates or our relationship
with such diagnostic company may otherwise terminate. In such
instances, we may not be able to enter into arrangements with
another diagnostic company to obtain supplies of an alternative
diagnostic test for use in connection with the development and
commercialization of our product candidates or do so on
commercially reasonable terms, which could adversely affect and/or
delay the development or commercialization of our product
candidates.
We may seek to establish collaborations and, if we are
not able to establish them on commercially reasonable terms, we may
have to alter our development and commercialization
plans.
From time to time we may engage in efforts to enter into licensing,
distribution and/or collaboration agreements with one or more
pharmaceutical or biotechnology companies to assist us with
development and/or commercialization of our other product
candidates. If we are successful in entering into such agreements,
we may not be able to negotiate agreements with economic terms
similar to those negotiated by other companies. We may not, for
example, obtain significant upfront payments, substantial royalty
rates or milestones. If we fail to enter into any such agreements
in a timely manner or at all, our efforts to develop and/or
commercialize our product candidates may be undermined. In
addition, if we do not raise funds through any such agreements, we
will need to rely on other financing mechanisms, such as sales of
debt or equity securities, to fund our operations. Such financing
mechanisms, if available, may not be sufficient or timely enough to
advance our programs forward in a meaningful way in the
short-term.
We may not be successful in entering into additional collaborations
as a result of many factors, including the following:
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competition in seeking appropriate collaborators;
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a
reduced number of potential collaborators due to recent business
combinations in the pharmaceutical industry;
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inability to negotiate collaborations on acceptable terms;
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inability to negotiate collaborations on a timely basis;
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a
potential collaborator’s evaluation of our product or product
candidates;
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potential collaborator’s resources and expertise; and
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restrictions due to an existing collaboration agreement.
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If we are unable to enter into collaborations, we may have to
curtail the commercialization or the development of any product
candidate on which we are seeking to collaborate, reduce or delay
its development program or those for other of our other development
programs, delay its potential commercialization or reduce the scope
of any sales or marketing activities, or increase our expenditures
and undertake development or commercialization activities at our
own expense. If we elect to increase our expenditures to fund
development or commercialization activities on our own, we may need
to obtain additional capital, which may not be available to us on
acceptable terms or at all. If we do not have sufficient funds, we
may not be able to develop or commercialize our product
candidates.
Even if we enter into collaboration agreements and strategic
partnerships or license our intellectual property, we may not be
able to maintain them or they may be unsuccessful, which could
delay our timelines or otherwise adversely affect our business.
We, as well as any collaborators or licensees of our
technologies and services, will not be able to commercialize our
product candidates if preclinical studies do not produce successful
results or clinical trials do not demonstrate safety and efficacy
in humans.
Preclinical and clinical testing is expensive, difficult to design
and implement, can take many years to complete and have an
uncertain outcome. Success in preclinical testing and early
clinical trials does not ensure that later clinical trials will be
successful, and interim results of a clinical trial do not
necessarily predict final results. We, as well as any licensees and
collaborators, may experience numerous unforeseen events during, or
as a result of, preclinical testing and the clinical trial process
that could delay or prevent the commercialization of product
candidates based on our technologies, including the following:
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Preclinical or clinical trials may produce negative or inconclusive
results, which may require additional preclinical testing,
additional clinical trials or the abandonment of projects that we,
our licensees or our collaborators expect to be promising. For
example, promising animal data may be obtained about the
anticipated efficacy of a product candidate and then human tests
may not result in such an effect. In addition, unexpected safety
concerns may be encountered that would require further testing even
if the product candidate produced an otherwise favorable response
in human subjects.
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Initial clinical results may not be supported by further or more
extensive clinical trials. For example, we or a licensee may obtain
data that suggest a desirable response from a product candidate in
a small human study, but when tests are conducted on larger numbers
of people, the same extent of response may not occur. If the
response generated by a product candidate is too low or occurs in
too few treated individuals, then the product candidate will have
no commercial value.
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Enrollment in any of our or any of our licensees’ or collaborators’
clinical trials may be slower than projected, resulting in
significant delays. The cost of conducting a clinical trial
increases as the time required to enroll adequate numbers of human
subjects to obtain meaningful results increases. Enrollment in a
clinical trial can be a slower-than-anticipated process because of
competition from other clinical trials, because the study is not of
interest to qualified subjects, or because the stringency of
requirements for enrollment limits the number of people who are
eligible to participate in the clinical trial.
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We, our licensees or our collaborators might have to suspend or
terminate clinical trials if the participating subjects are being
exposed to unacceptable health risks. Animal tests do not always
adequately predict potential safety risks to human subjects. The
risk of any product candidate is unknown until it is tested in
human subjects, and if subjects experience adverse events during
the clinical trial, the trial may have to be suspended and modified
or terminated entirely.
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Regulators or institutional review boards may suspend or terminate
clinical research for various reasons, including safety concerns or
noncompliance with regulatory requirements.
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Any regulatory approval ultimately obtained may be limited or
subject to restrictions or post-approval commitments that render
the product not commercially viable.
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The effects of our technology-derived or technology-enhanced
product candidates may not be the desired effects or may include
undesirable side effects.
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Significant clinical trial delays could allow our competitors to
bring products to market before we, any of our licensees or our
collaborators do and impair our ability to commercialize our
technologies and product candidates based on our technologies. Poor
clinical trial results or delays may make it impossible to license
a product candidate or so reduce its attractiveness to prospective
licensees that we will be unable to successfully develop and
commercialize such a product candidate.
Because our development activities are expected to rely
heavily on sensitive and personal information, an area which is
highly regulated by privacy laws, we may not be able to generate,
maintain or access essential patient samples or data to continue
our research and development efforts in the future on reasonable
terms and conditions, which may adversely affect our
business.
Although we are not subject to the Health Insurance Portability and
Accountability Act of 1996 (“HIPAA”), as we are neither a Covered
Entity nor Business Associate (as defined in HIPAA and the Health
Information Technology and Clinical Health Act (the “HITECH Act”),
we may have access to very sensitive data regarding patients whose
tissue samples are used in our studies. This data will contain
information that is personal in nature. The maintenance of this
data is subject to certain privacy-related laws, which impose upon
us administrative and financial burdens, and litigation risks. In
the U.S., numerous federal and state laws and regulations,
including state data breach notification laws, state health
information privacy laws and federal and state consumer protection
laws govern the collection, use, disclosure and protection of
health-related and other personal information. For instance, the
rules promulgated by the Department of Health and Human Services
under HIPAA create national standards to protect patients’ medical
records and other personal information in the U.S. These rules
require that healthcare providers and other covered entities obtain
written authorizations from patients prior to disclosing protected
health care information of the patient to companies. If the patient
fails to execute an authorization or the authorization fails to
contain all required provisions, then we will not be allowed access
to the patient’s information and our research efforts can be
substantially delayed. Furthermore, use of protected health
information that is provided to us pursuant to a valid patient
authorization is subject to the limits set forth in the
authorization (i.e., for use in research and in submissions to
regulatory authorities for product approvals). As such, we are
required to implement policies, procedures and reasonable and
appropriate security measures to protect individually identifiable
health information we receive from covered entities, and to ensure
such information is used only as authorized by the patient. Any
violations of these rules by us could subject us to civil and
criminal penalties and adverse publicity and could harm our ability
to initiate and complete clinical trials required to support
regulatory applications for our product candidates. In addition,
HIPAA does not replace federal, state, or other laws that may grant
individuals even greater privacy protections.
California recently enacted the California Consumer Privacy Act
(“CCPA”), which creates new individual privacy rights for
California consumers and places increased privacy and security
obligations on entities handling personal data of consumers or
households. The CCPA requires covered companies to provide new
disclosure to consumers about such companies’ data collection, use
and sharing practices, provide such consumers new ways to opt-out
of certain sales or transfers of personal information, and provide
consumers with additional causes of action. The CCPA went into
effect on January 1, 2020, and beginning July 1, 2020, the
California Attorney General may bring enforcement actions for
violations. The CCPA, among other things, requires covered
companies to provide disclosures to California consumers concerning
the collection and sale of personal information, and will give such
consumers the right to opt-out of certain sales of personal
information. The CCPA may increase our company`s compliance costs
and potential liability, and we cannot yet predict the impact of
the CCPA on our business.
International data protection laws, including Regulation 2016/679,
known as the General Data Protection Regulation (“GDPR”), may also
apply to health-related and other personal information obtained
outside of the United States. The GDPR went into effect on May 25,
2018. The GDPR strengthened data protection requirements in the
European Union, as well as potential fines for noncompliant
companies of up to the greater of €20 million or 4% of annual
global revenue. The regulation imposes numerous new requirements
for the collection, use, storage and disclosure of personal
information, including more stringent requirements relating to
consent and the information that must be shared with data subjects
about how their personal information is used, the obligation to
notify regulators and affected individuals of personal data
breaches, extensive new internal privacy governance obligations and
obligations to honor expanded rights of individuals in relation to
their personal information, including the right to access, correct
and delete their data. In addition, the GDPR includes restrictions
on cross-border data transfers. The GDPR increased our
responsibility and liability in relation to personal data that we
process where such processing is subject to the GDPR, and we may be
required to put in place additional mechanisms to ensure compliance
with the GDPR, including as implemented by individual countries.
Further, the United Kingdom’s exit from the European Union, often
referred to as Brexit, has created uncertainty with regard to data
protection regulation in the United Kingdom. In particular, it is
unclear how data transfers to and from the United Kingdom will be
regulated.
Failure to comply with data protection laws and regulations could
result in government enforcement actions, which may involve civil
and criminal penalties, private litigation and/or adverse publicity
and could negatively affect our operating results and business.
Claims that we have violated individuals’ privacy rights or
breached our contractual obligations, even if we are not found
liable, could be expensive and time-consuming to defend and could
result in adverse publicity that could harm our business.
We can provide no assurance that future legislation will not
prevent us from generating or maintaining personal data or that
patients will consent to the use of their personal information,
either of which may prevent us from undertaking or publishing
essential research. These burdens or risks may prove too great for
us to reasonably bear and may adversely affect our ability to
achieve profitability or maintain profitably in the future.
We may be exposed to liability claims associated with
the use of hazardous materials and chemicals.
Our research and development activities may involve the controlled
use of hazardous materials and chemicals. Although we believe that
our safety procedures for using, storing, handling and disposing of
these materials comply with federal, state and local laws and
regulations, we cannot eliminate the risk of accidental injury or
contamination from these materials. In the event of such an
accident, we could be held liable for any resulting damages and any
liability could materially adversely affect our business, financial
condition and results of operations. We do not currently maintain
hazardous materials insurance coverage. In addition, the federal,
state and local laws and regulations governing the use,
manufacture, storage, handling and disposal of hazardous or
radioactive materials and waste products may require us to incur
substantial compliance costs that could materially harm our
business.
If we are unable to retain and recruit qualified
scientists and advisors, or if any of our key executives, key
employees or key consultants discontinues his or her employment or
consulting relationship with us, it may delay our development
efforts or otherwise harm our business.
We may not be able to attract or retain qualified management and
scientific and clinical personnel in the future due to the intense
competition for qualified personnel among biotechnology,
pharmaceutical and other businesses, particularly in the San Diego,
California area. Our industry has experienced a high rate of
turnover of management personnel in recent years. If we are not
able to attract, retain and motivate necessary personnel to
accomplish our business objectives, we may experience constraints
that will significantly impede the successful development of any
product candidates, our ability to raise additional capital and our
ability to implement our overall business strategy. In addition,
our CMO operations will depend, in part, on our ability to attract
and retain an appropriately skilled and sufficient workforce to
operate our development and manufacturing facilities. The
facilities are located in a growing biotechnology hub and
competition for skilled workers will continue to increase as the
industry undergoes further growth in the area.
We are highly dependent on key members of our management and
scientific staff, especially John W. Huemoeller II., Chairman of
the Board, Chief Executive Officer and President, Catalina
Valencia, Sapphire’s Chief Executive Officer, and Sergei Svarovsky,
our Chief Science Officer. Our success also depends on our ability
to continue to attract, retain and motivate highly skilled junior,
mid-level and senior managers as well as junior, mid-level and
senior scientific and medical personnel. The loss of any of our
executive officers, key employees or key consultants and our
inability to find suitable replacements could impede the
achievement of our research and development objectives, and
potentially harm our business, financial condition and prospects.
Furthermore, recruiting and retaining qualified scientific
personnel to perform research and development work in the future is
critical to our success. We may be unable to attract and retain
personnel on acceptable terms given the competition among
biotechnology, biopharmaceutical and health care companies,
universities and non-profit research institutions for experienced
scientists. Certain of our current officers, directors, scientific
advisors and/or consultants or certain of the officers, directors,
scientific advisors and/or consultants hereafter appointed may from
time to time serve as officers, directors, scientific advisors
and/or consultants of other biopharmaceutical or biotechnology
companies. We do not maintain “key man” insurance policies on any
of our officers or employees. All of our employees are employed “at
will” and, therefore, each employee may leave our employment at any
time.
We may not be able to attract or retain qualified management and
scientific personnel in the future due to the intense competition
for a limited number of qualified personnel among
biopharmaceutical, biotechnology, pharmaceutical and other
businesses. Many of the other pharmaceutical companies that we
compete against for qualified personnel have greater financial and
other resources, different risk profiles and a longer history in
the industry than we do. They also may provide more diverse
opportunities and better chances for career advancement. Some of
these characteristics may be more appealing to high quality
candidates than what we have to offer. If we are unable to continue
to attract and retain high quality personnel, the rate and success
at which we can develop and commercialize product candidates will
be limited.
We plan to grant stock options or other forms of equity awards in
the future as a method of attracting and retaining employees,
motivating performance and aligning the interests of employees with
those of our stockholders. If we are unable to implement and
maintain equity compensation arrangements that provide sufficient
incentives, we may be unable to retain our existing employees and
attract additional qualified candidates. If we are unable to retain
our existing employees, including qualified scientific personnel,
and attract additional qualified candidates, our business and
results of operations could be adversely affected.
Our employees may engage in misconduct or other
improper activities, including noncompliance with regulatory
standards and requirements, which could have a material adverse
effect on our business.
We are exposed to the risk of employee fraud or other misconduct.
Misconduct by employees could include intentional failures to
comply with FDA regulations, provide accurate information to the
FDA, comply with manufacturing standards we have established,
comply with federal and state health-care fraud and abuse laws and
regulations, comply with laws and regulations (including, but not
limited to the Foreign Corrupt Practices Act of 1977, as amended,
15 U.S.C. §§ 78dd-1 (“FCPA”)) and internal policies restricting
payments to government agencies and representatives, report
financial information or data accurately or disclose unauthorized
activities to us. In particular, sales, marketing and business
arrangements in the healthcare industry are subject to extensive
laws and regulations intended to prevent fraud, kickbacks,
self-dealing and other abusive practices. These laws and
regulations may restrict or prohibit a wide range of pricing,
discounting, marketing and promotion, sales commission, customer
incentive programs and other business arrangements. 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. We have
adopted a Code of Business Conduct and Ethics, but 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 fines or other sanctions.
We may be subject, directly or indirectly, to federal
and state healthcare fraud and abuse laws, false claims laws and
health information privacy and security laws. If we are unable to
comply, or have not fully complied, with such laws, we could face
substantial penalties.
If we obtain FDA approval for any of our product candidates and
begin commercializing those products in the U.S., our operations
may be directly, or indirectly through our customers, subject to
various federal and state fraud and abuse laws, including, without
limitation, the federal Anti-Kickback Statute and the federal False
Claims Act. These laws may impact, among other things, our proposed
sales, marketing and education programs. In addition, we may be
subject to patient privacy regulation by both the federal
government and the states in which we conduct our business. The
laws that may affect our ability to operate include:
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the federal Anti-Kickback Statute, which prohibits, among other
things, persons from knowingly and willfully soliciting, receiving,
offering or paying remuneration, directly or indirectly, to induce,
or in return for, the purchase or recommendation of an item or
service reimbursable under a federal healthcare program, such as
the Medicare and Medicaid programs;
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federal civil and criminal false claims laws and civil monetary
penalty laws, which prohibit, among other things, individuals or
entities from knowingly presenting, or causing to be presented,
claims for payment from Medicare, Medicaid, or other third-party
payers that are false or fraudulent;
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HIPAA, which created new federal criminal statutes that prohibit
executing a scheme to defraud any healthcare benefit program and
making false statements relating to healthcare matters;
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HIPAA, as amended by the HITECH Act, and its implementing
regulations, which imposes certain requirements relating to the
privacy, security and transmission of individually identifiable
health information; and
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state law equivalents of each of the above federal laws, such as
anti-kickback and false claims laws which may apply to items or
services reimbursed by any third-party payer, including commercial
insurers, and state laws governing 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, thus complicating compliance efforts.
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If our operations are found to be in violation of any of the laws
described above or any other governmental regulations that apply to
us, we may be subject to penalties, including civil and criminal
penalties, damages, fines and the curtailment or restructuring of
our operations, any of which could adversely affect our ability to
operate our business and our results of operations.
If product liability lawsuits are brought against us,
we may incur substantial liabilities and may be required to limit
commercialization of our product candidates.
We face an inherent risk of product liability as a result of the
clinical testing of our product candidates and will face an even
greater risk for the commercialization of any products, including
SPX-009. For example, we may be sued if any product we develop
allegedly causes injury or is found to be otherwise unsuitable
during product testing, manufacturing, marketing or sale. Any such
product liability claims may include allegations of defects in
manufacturing, defects in design, a failure to warn of dangers
inherent in the product, negligence, strict liability, and a breach
of warranties. Claims could also be asserted under state consumer
protection acts. If we cannot successfully defend ourselves against
product liability claims, we may incur substantial liabilities or
be required to limit commercialization of our product candidates,
if approved. Even successful defense would require significant
financial and management resources. Regardless of the merits or
eventual outcome, liability claims may result in:
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decreased demand for our product candidates or products that we may
develop;
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injury to our reputation;
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withdrawal of clinical trial participants;
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initiation of investigations by regulators;
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restrictions on the marketing or manufacturing of the product,
withdrawal of the product from the market or voluntary or mandatory
product recalls;
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costs to defend the related litigation;
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diversion of management’s time and our resources;
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substantial monetary awards to trial participants or patients;
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product recalls, withdrawals or labeling, marketing or promotional
restrictions;
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loss of revenues from product sales; and
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the inability to commercialize our product candidates.
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Our inability to obtain and retain sufficient product liability
insurance at an acceptable cost to protect against potential
product liability claims could prevent or inhibit the
commercialization of products we develop. We currently carry
product liability insurance and errors and omissions insurance that
we believe is appropriate for our company. Although we maintain
product liability insurance, any claim that may be brought against
us could result in a court judgment or settlement in an amount that
is not covered, in whole or in part, by our insurance or that is in
excess of the limits of our insurance coverage. Our insurance
policies also have various exclusions, and we may be subject to a
product liability claim for which we have insufficient or no
coverage. If we have to pay any amounts awarded by a court or
negotiated in a settlement that exceed our coverage limitations or
that are not covered by our insurance, we may not have, or be able
to obtain, sufficient capital to pay such amounts. In addition,
insurance coverage is becoming increasingly expensive, and we may
not be able to maintain insurance coverage at a reasonable cost. We
also may not be able to obtain additional insurance coverage that
will be adequate to cover product liability risks that may arise.
Consequently, a product liability claim may result in losses that
could be material to our business, financial condition and results
of operations.
We will need to increase the size of our company and
may not effectively manage our growth.
Our success will depend upon growing our business and our employee
base. Over the next 12 months, we plan to add additional employees
to assist us with research and development and our
commercialization efforts. Our future growth, if any, may cause a
significant strain on our management, and our operational,
financial and other resources. Our ability to manage our growth
effectively will require us to implement and improve our
operational, financial and management systems and to expand, train,
manage and motivate our employees. These demands may require the
hiring of additional management personnel and the development of
additional expertise by management. Any increase in resources
devoted to research and product development without a corresponding
increase in our operational, financial and management systems could
have a material adverse effect on our business, financial
condition, and results of operations.
Drug development involves a lengthy and expensive
process with an uncertain outcome, and results of earlier studies
and trials may not be predictive of future trial
results.
Clinical testing is expensive and can take many years to complete,
and its outcome is risky and uncertain. Failure can occur at any
time during the clinical trial process. The results of preclinical
studies and early clinical trials of our product candidates may not
be predictive of the results of later-stage clinical trials.
Product candidates in later stages of clinical trials may fail to
show the desired safety and efficacy traits despite having
progressed through preclinical studies and initial clinical trials.
It is not uncommon for companies in the pharmaceutical industry to
suffer significant setbacks in advanced clinical trials due to lack
of efficacy or adverse safety profiles, notwithstanding promising
results in earlier trials. Our future clinical trial results may
not be successful.
This drug candidate development risk is heightened by any changes
in the planned clinical trials compared to the completed clinical
trials. As product candidates are developed through preclinical to
early and late-stage clinical trials towards approval and
commercialization, it is customary that various aspects of the
development program, such as manufacturing and methods of
administration, are altered along the way in an effort to optimize
processes and results. While these types of changes are common and
are intended to optimize the product candidates for late-stage
clinical trials, approval and commercialization, such changes do
carry the risk that they will not achieve these intended
objectives.
In the event we are able to conduct a pivotal clinical trial of a
product candidate, the results of such trial may not be adequate to
support marketing approval. Because our product candidates are
intended for use in life-threatening diseases, in some cases we
ultimately intend to seek marketing approval for each product
candidate based on the results of a single pivotal clinical trial.
As a result, these trials may receive enhanced scrutiny from the
FDA. For any such pivotal trial, if the FDA disagrees with our
choice of primary endpoint or the results for the primary endpoint
are not robust or significant relative to control, are subject to
confounding factors, or are not adequately supported by other study
endpoints, including possibly overall survival or complete response
rate, the FDA may refuse to approve an NDA, Biologics License
Application or other application for marketing based on such
pivotal trial. The FDA may require additional clinical trials as a
condition for approving our product candidates.
Interim “top-line” and preliminary data from our
clinical trials that we announce or publish from time to time may
change as more patient data become available and are subject to
audit and verification procedures that could result in material
changes in the final data.
From time to time, we may publish interim “top-line” or preliminary
data from our clinical trials, which is based on a preliminary
analysis of then-available data, and the results and related
findings and conclusions are subject to change following a more
comprehensive review of the data related to the particular study.
We also make assumptions, estimations, calculations and conclusions
as part of our analyses of data, and we may not have received or
had the opportunity to fully and carefully evaluate all data. As a
result, the topline results that we report may differ from future
results of the same studies, or different conclusions or
considerations may qualify such results, once additional data have
been received and fully evaluated. Preliminary or interim data from
clinical trials that we may complete are subject to the risk that
one or more of the clinical outcomes may materially change as
patient enrollment and dosing continues and more patient data
become available. Preliminary or interim data also remain subject
to audit and verification procedures that may result in the final
data being materially different from the preliminary data we
previously published. As a result, interim and preliminary data
should be viewed with caution until the final data are available.
Adverse differences between preliminary or interim data and final
data could significantly harm our business, financial condition and
results of operations.
Further, others, including regulatory agencies, may not accept or
agree with our assumptions, estimates, calculations, conclusions or
analyses or may interpret or weigh the importance of data
differently, which could impact the value of the particular
program, the approvability or commercialization of the particular
product candidate or product and our company in general. Data
disclosures must be carefully managed to conform to limitations on
preapproval promotion and laws related to clinical trial
registration and posting of results. In addition, the information
we choose to publicly disclose regarding a particular study or
clinical trial is based on what is typically extensive information,
and you or others may not agree with what we determine is the
material or otherwise appropriate information to include in our
disclosure, and any information we determine not to disclose may
ultimately be deemed significant with respect to future decisions,
conclusions, views, activities or otherwise regarding a particular
drug, product, product candidate or our business. If the top-line
data that we report differ from actual results, or if others,
including regulatory authorities, disagree with the conclusions
reached, our ability to obtain approval for, and commercialize, our
product candidates may be harmed, which could harm our business,
financial condition and results of operations.
Any disruption in our research and development
facilities could adversely affect our business, financial condition
and results of operations.
Our principal executive offices, which house our research and
development programs, are in San Diego, California. Our facilities
may be affected by natural or man-made disasters. Earthquakes are
of particular significance since our facilities are located in an
earthquake-prone area. We are also vulnerable to damage from other
types of disasters, including power loss, attacks from extremist
organizations, fires, floods and similar events. If our facilities
are affected by a natural or man-made disaster, we may be forced to
curtail our operations and/or rely on third-parties to perform some
or all of our research and development activities. Although we
believe we possess adequate insurance for damage to our property
and the disruption of our business from casualties, such insurance
may not be sufficient to cover all of our potential losses and may
not continue to be available to us on acceptable terms, or at all.
In the future, we may choose to expand our operations in either our
existing facilities or in new facilities. If we expand our
worldwide manufacturing locations, there can be no assurance that
this expansion will occur without implementation difficulties, or
at all.
Our business and operations would suffer in the event
of system failures.
Despite the implementation of security measures, our internal
computer systems and those of our CROs and other contractors and
consultants are vulnerable to damage from computer viruses,
unauthorized access, cybersecurity attacks or hacking, natural
disasters, terrorism, war and telecommunication and electrical
failures. In addition, as a result of the COVID-19 pandemic, we may
face increased cybersecurity risks due to our reliance, and the
reliance of our CROs, contractors and consultants reliance, on
internet technology and the number of our employees, and employees
of our CROs, contractors and consultants, who are working remotely,
which may create additional opportunities for cybercriminals to
exploit vulnerabilities. While we have not experienced any such
system failure, accident or security breach to date, 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. For example, the loss of clinical trial data from
completed or ongoing or planned 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 was to result in a loss of
or damage to our data or applications, or inappropriate disclosure
of confidential or proprietary information, we could incur material
legal claims and liability, damage to our reputation, suffer loss
or harm to our intellectual property rights and the further
research, development and commercial efforts of our products and
product candidates could be delayed. If we are held liable for a
claim against which we are not insured or for damages exceeding the
limits of our insurance coverage, whether arising out of
cybersecurity matters, or from some other matter, that claim could
have a material adverse effect on our results of operations.
Further, a cybersecurity attack, data breach or privacy violation
that leads to disclosure or modification of, or prevents access to,
patient information, including personally identifiable information
or protected health information, could harm our reputation, compel
us to comply with federal and/or state breach notification laws and
foreign law equivalents, subject us to mandatory corrective action,
require us to verify the correctness of database contents and
otherwise subject us to liability under laws and regulations that
protect personal data, resulting in increased costs or loss of
revenue. Portions of our information technology systems may
experience interruptions, delays or cessations of service or
produce errors in connection with ongoing systems implementation
work. Cybersecurity attacks in particular are evolving and include,
but are not limited to, threats, malicious software, ransom ware,
attempts to gain unauthorized access to data and other electronic
security breaches that could lead to disruptions in systems,
misappropriation of confidential or otherwise protected information
and corruption of data. If we are unable to prevent such
cybersecurity attacks, data security breaches or privacy violations
or implement satisfactory remedial measures, our operations could
be disrupted, and we may suffer loss of reputation, financial loss
and other regulatory penalties because of lost or misappropriated
information, including sensitive patient data. In addition, these
breaches and other inappropriate access can be difficult to detect,
and any delay in identifying them may lead to increased harm of the
type described above.
Comprehensive tax reform legislation could adversely
affect our business and financial condition.
Our effective income tax rate in the future could be adversely
affected by a number of factors, including: changes in the mix of
earnings in countries with differing statutory tax rates, changes
in the valuation of deferred tax assets and liabilities, changes in
tax laws, and the outcome of income tax audits in various
jurisdictions. We regularly assess all of these matters to
determine the adequacy of its tax provision, which is subject to
significant discretion.
Compliance with changing regulations concerning
corporate governance and public disclosure may result in additional
expenses.
There have been changing laws, regulations and standards relating
to corporate governance and public disclosure, including the
Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Dodd-Frank Act”), the Sarbanes-Oxley Act of 2002
(“Sarbanes-Oxley”), new regulations promulgated by the SEC and
rules promulgated by the national securities exchanges. The
Dodd-Frank Act, enacted in July 2010, expanded federal regulation
of corporate governance matters and imposes requirements on public
companies to, among other things, provides stockholders with a
periodic advisory vote on executive compensation and also adds
compensation committee reforms and enhanced pay-for-performance
disclosures. While some provisions of the Dodd-Frank Act were
effective upon enactment, others have been and will be implemented
upon the SEC’s adoption of related rules and regulations. The scope
and timing of the adoption of such rules and regulations is
uncertain and, accordingly, the cost of compliance with the
Dodd-Frank Act is also uncertain. Areas subject to potential
change, amendment or repeal include the Dodd-Frank Act, including §
619 (12 U.S.C. § 1851) known as the Volcker Rule and various swaps
and derivatives regulations, the authority of the Federal Reserve
and the Financial Stability Oversight Council, and renewed
proposals to separate banks’ commercial and investment banking
activities.
These new or changed laws, regulations and standards are, or will
be, subject to varying interpretations in many cases due to their
lack of specificity, and, as a result, their application in
practice may evolve over time as new guidance is provided by
regulatory and governing bodies, which could result in continuing
uncertainty regarding compliance matters and higher costs
necessitated by ongoing revisions to disclosure and governance
practices. As a result, our efforts to comply with evolving laws,
regulations and standards are likely to continue to result in
increased general and administrative expenses and a diversion of
management time and attention from revenue-generating activities to
compliance activities. Members of our board of directors and our
principal executive officer and principal financial officer could
face an increased risk of personal liability in connection with the
performance of their duties. As a result, we may have difficulty
attracting and retaining qualified directors and executive
officers, which could harm our business. If the actions we take in
our efforts to comply with new or changed laws, regulations and
standards differ from the actions intended by regulatory or
governing bodies, we could be subject to liability under applicable
laws or our reputation may be harmed.
Risks Related to Acquisitions
We have acquired, and may in the future acquire,
assets, businesses and technologies as part of our business
strategy. If we acquire companies or technologies in the future,
they could prove difficult to integrate, disrupt our business,
dilute stockholder value, and adversely affect our operating
results and the value of our common stock.
As part of our business strategy, we may acquire, enter into joint
ventures with, or make investments in complementary or synergistic
companies, services, and technologies in the future. Acquisitions
and investments involve numerous risks, including without
limitation:
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difficulties in identifying and acquiring products, technologies,
proprietary rights or businesses that will help our business;
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difficulties in integrating operations, technologies, services, and
personnel;
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diversion of financial and managerial resources from existing
operations;
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the risk of entering new development activities and markets in
which we have little to no experience;
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risks related to the assumption of known and unknown
liabilities;
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risks related to our ability to raise sufficient capital to fund
additional operating activities; and
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the issuance of our securities as partial or full payment for any
acquisitions and investments could result in material dilution to
our existing stockholders.
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As a result, if we fail to properly evaluate acquisitions or
investments, we may not achieve the anticipated benefits of any
such acquisitions, we may incur costs in excess of what we
anticipate, and management resources and attention may be diverted
from other necessary or valuable activities.
Any acquisitions we make could disrupt our business and
seriously harm our financial condition.
We have in the past made (and may, from time to time, consider)
acquisitions of complementary companies, products or technologies.
Acquisitions involve numerous risks, including difficulties in the
assimilation of the acquired businesses, the diversion of our
management’s attention from other business concerns and potential
adverse effects on existing business relationships. In addition,
any acquisitions could involve the incurrence of substantial
additional indebtedness. We cannot assure you that we will be able
to successfully integrate any acquisitions that we pursue or that
such acquisitions will perform as planned or prove to be beneficial
to our operations and cash flow. Any such failure could seriously
harm our business, financial condition and results of
operations.
Risks Related to Our Intellectual Property
Our ability to protect our intellectual property rights
will be critically important to the success of our business, and we
may not be able to protect these rights in the U.S. or
abroad.
Our success, competitive position and future revenues will depend
in part on our ability to obtain and maintain patent protection for
our product candidates, methods, processes and other technologies,
to prevent third parties from infringing on our proprietary rights,
exclude others from using our technology and to operate without
infringing upon the proprietary rights of third parties. We will be
able to protect our proprietary rights from unauthorized use by
third parties only to the extent that our proprietary rights are
covered by valid and enforceable patents or are effectively
maintained as trade secrets. We attempt to protect our proprietary
position by maintaining trade secrets and by filing U.S. and
foreign patent applications related to our proprietary technology,
inventions and improvements that are important to the development
of our business. The first of the patent applications related to
our ongoing business operations was issued in 2020, and we continue
to file additional patent applications for our product candidates
and technology.
We have commenced generating a patent portfolio to protect each
product candidate in our pipeline. However, the patent position of
biopharmaceutical companies involves complex legal and factual
questions, and therefore we cannot predict with certainty whether
any patent applications that we have filed or that we may file in
the future will be approved, will cover our products or product
candidates or that any resulting patents will be enforced. In
addition, third parties may challenge, seek to invalidate, limit
the scope of or circumvent any of our patents, once they are
issued. Thus, any patents that we own or license from third parties
or joint venture or development partners may not provide any
protection against competitors. Any patent applications that we
have filed or that we may file in the future, or those we may
license from third parties or joint venture or development
partners, may not result in patents being issued. Moreover,
disputes between our licensing or joint development partners and us
may arise over license scope, or ownership, assignment,
inventorship and/or rights to use or commercialize patent or other
proprietary rights, which may adversely impact our ability to
obtain and protect our proprietary technology and products. Also,
patent rights may not provide us with adequate proprietary
protection or competitive advantages against competitors with
similar technologies or products.
In addition, the laws of certain foreign countries do not protect
our intellectual property rights to the same extent as do the laws
of the U.S. If we fail to apply for intellectual property
protection or if we cannot adequately protect our intellectual
property rights in these foreign countries, our competitors may be
able to compete more effectively against us, which could adversely
affect our competitive position, as well as our business, financial
condition and results of operations.
Periodic maintenance fees, renewal fees, annuity fees and various
other governmental fees on patents and/or applications will be due
to the PTO and various foreign patent offices at various points
over the lifetime of our patents and/or applications. We have
systems in place to remind us to pay these fees, and we rely on our
outside counsel or service providers to pay these fees when due.
Additionally, the PTO and various foreign patent offices require
compliance with a number of procedural, documentary, fee payment
and other similar provisions during the patent application process.
We employ reputable law firms and other professionals to help us
comply, and in many cases, an inadvertent lapse can be cured by
payment of a late fee or by other means in accordance with rules
applicable to the particular jurisdiction. However, there are
situations in which noncompliance can result in abandonment or
lapse of the patent or patent application, resulting in partial or
complete loss of patent rights in the relevant jurisdiction. If
such an event were to occur, it could have a material adverse
effect on our business. In addition, we are responsible for the
payment of patent fees for patent rights that we have licensed from
other parties. If any licensor of these patents does not itself
elect to make these payments, and we fail to do so, we may be
liable to the licensor for any costs and consequences of any
resulting loss of patent rights.
We may become involved in lawsuits to protect or
enforce our patents or other intellectual property, which could be
expensive, time consuming and unsuccessful.
Competitors may infringe our patents, trademarks, copyrights or
other intellectual property. To counter infringement or
unauthorized use, we may be required to file infringement claims,
which can be expensive and time consuming and divert the time and
attention of our management and scientific personnel. Any claims we
assert against perceived infringers could provoke these parties to
assert counterclaims against us alleging that we infringe their
patents, in addition to counterclaims asserting that our patents
are invalid or unenforceable, or both. In any patent infringement
proceeding, there is a risk that a court will decide that a patent
of ours is invalid or unenforceable, in whole or in part, and that
we do not have the right to stop the other party from using the
invention at issue. There is also a risk that, even if the validity
of such patents is upheld, the court will construe the patent’s
claims narrowly or decide that we do not have the right to stop the
other party from using the invention at issue on the grounds that
our patent claims do not cover the invention. An adverse outcome in
a litigation or proceeding involving our patents could limit our
ability to assert our patents against those parties or other
competitors, and may curtail or preclude our ability to exclude
third parties from making and selling similar or competitive
products. Any of these occurrences could adversely affect our
competitive business position, business prospects and financial
condition. Similarly, if we assert trademark infringement claims, a
court may determine that the marks we have asserted are invalid or
unenforceable, or that the party against whom we have asserted
trademark infringement has superior rights to the marks in
question. In this case, we could ultimately be forced to cease use
of such trademarks.
Even if we establish infringement, the court may decide not to
grant an injunction against further infringing activity and instead
award only monetary damages, which may or may not be an adequate
remedy. Furthermore, because of the substantial amount of discovery
required in connection with intellectual property litigation, there
is a risk that some of our confidential information could be
compromised by disclosure during litigation. There could also be
public announcements of the results of hearings, motions or other
interim proceedings or developments. If securities analysts or
investors perceive these results to be negative, it could have a
material adverse effect on the price of shares of our common stock.
Moreover, there can be no assurance that we will have sufficient
financial or other resources to file and pursue such infringement
claims, which typically last for years before they are concluded.
Even if we ultimately prevail in such claims, the monetary cost of
such litigation and the diversion of the attention of our
management and scientific personnel could outweigh any benefit we
receive as a result of the proceedings.
Our long-term success depends on intellectual property
protection; if our intellectual property rights are invalidated or
circumvented, our business will be adversely
affected.
Our long-term success depends on our ability to continually
discover, develop and commercialize innovative new pharmaceutical
products. Without strong intellectual property protection, we may
be unable to generate the returns necessary to support the enormous
investments in research and development and capital as well as
other expenditures required to bring new drugs to the market and
for commercialization.
Intellectual property protection varies throughout the world and is
subject to change over time. In the U.S., for small molecule drug
products, such as SPX-009 (which is held by our subsidiary,
Sapphire), the Hatch-Waxman Act provides generic companies powerful
incentives to seek to invalidate our pharmaceutical patents. As a
result, we expect that our U.S. patents on major pharmaceutical
products will be routinely challenged, and there can be no
assurance that our patents will be upheld. We face generic
manufacturer challenges to our patents outside the U.S. as well. In
addition, competitors or other third parties may claim that our
activities infringe patents or other intellectual property rights
held by them. If successful, such claims could result in our being
unable to market a product in a particular territory or being
required to pay damages for past infringement or royalties on
future sales.
If any of our trade secrets, know-how or other
proprietary information is disclosed, the value of our trade
secrets, know-how and other proprietary rights would be
significantly impaired and our business and competitive position
would suffer.
Our success also depends upon the skills, knowledge and experience
of our scientific and technical personnel and our consultants and
advisors, as well as our licensors. To help protect our proprietary
know-how and our inventions for which patents may be unobtainable
or difficult to obtain, or prior to seeking patent protection, we
rely on trade secret protection and confidentiality agreements.
Unlike some of our competitors, in addition to certain
manufacturing processes, we maintain our proprietary libraries for
ourselves as trade secrets. To this end, we require all our
employees, consultants, advisors and contractors to enter into
agreements which prohibit the disclosure of confidential
information and, where applicable, require disclosure and
assignment to us of the ideas, developments, discoveries and
inventions important to our business. These agreements may not
provide adequate protection for our trade secrets, know-how or
other proprietary information in the event of any unauthorized use
or disclosure or the lawful development by others of such
information. If any of our trade secrets, know-how or other
proprietary information is disclosed, the value of our trade
secrets, know-how and other proprietary rights would be
significantly impaired and our business and competitive position
would suffer. Moreover, our third-party licensing partners may
retain rights in some of our proprietary or joint trade secrets,
know-how, patented inventions or other proprietary information,
including rights to sublicense and rights of publication, which may
adversely impact our ability to obtain patents and protect trade
secrets, know-how or other proprietary information. In addition,
the U.S. government may retain rights in some of our patents or
other proprietary information.
In addition, many of the formulations used and processes developed
by us in manufacturing any of our collaborators’ products are
subject to trade secret protection, patents or other intellectual
property protections owned or licensed by such collaborator. While
we make significant efforts to protect our collaborators’
proprietary and confidential information, including requiring our
employees to enter into agreements protecting such information, if
any of our employees breaches the non-disclosure provisions in such
agreements, or if our collaborators make claims that their
proprietary information has been disclosed, our reputation may
suffer damage and we may become subject to legal proceedings that
could require us to incur significant expenses and divert our
management’s time, attention and resources.
Claims that we infringe upon the rights of third
parties may give rise to costly and lengthy litigation, and we
could be prevented from selling products, forced to pay damages,
and defend against litigation.
Third parties may assert patent or other intellectual property
infringement claims against us or our strategic partners or
licensees with respect to our technologies and product candidates
or potential product candidates. If our products, methods,
processes and other technologies infringe upon the proprietary
rights of other parties, we could incur substantial costs and we
may have to:
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obtain licenses, which may not be available on commercially
reasonable terms, if at all, and may be non-exclusive, thereby
giving our competitors access to the same intellectual property
licensed to us;
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redesign our products or processes to avoid infringement;
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stop using the subject matter validly claimed in the patents held
by others;
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pay damages; and
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defend litigation or administrative proceedings which may be costly
whether we win or lose, and which could result in a substantial
diversion of our valuable management resources.
|
Even if we were to prevail, any litigation could be costly and
time-consuming and would divert the attention of our management and
key personnel from our business operations. Furthermore, as a
result of a patent infringement suit brought against us or our
strategic partners or licensees, we or our strategic partners or
licensees may be forced to stop or delay developing, manufacturing
or selling technologies, product candidates or potential products
that are claimed to infringe a third party’s intellectual property
unless that party grants us or our strategic partners’ or
licensees’ rights to use its intellectual property. Ultimately, we
may be unable to develop some of our technologies or potential
products or may have to discontinue development of a product
candidate or cease some of our business operations as a result of
patent infringement claims, which could severely harm our
business.
In addition, our collaborators’ products may be subject to claims
of intellectual property infringement and such claims could
materially affect our business if their products cease to be
manufactured and they have to discontinue the use of the infringing
technology which we may provide. Any of the foregoing could affect
our ability to compete or could have a material adverse effect on
our business, financial condition and results of operations.
Our position as a relatively small company may cause us
to be at a significant disadvantage in defending our intellectual
property rights and in defending against infringement claims by
third parties.
Litigation relating to the ownership and use of intellectual
property is expensive, and our position as a small company in an
industry dominated by very large companies may cause us to be at a
significant disadvantage in defending our intellectual property
rights and in defending against claims that our technology
infringes or misappropriates third party intellectual property
rights. However, we may seek to use various post-grant
administrative proceedings, including new procedures created under
the America Invents Act, to invalidate potentially overly-broad
third party rights. Even if we can defend our position, the cost of
doing so may adversely affect our ability to grow, generate revenue
or become profitable. In the course of the ongoing litigation or
any future additional litigation to which we may be subject, we may
not be able to protect our intellectual property at a reasonable
cost, or at all. The outcome of litigation is always uncertain, and
in some cases could include judgments against us that require us to
pay damages, enjoin us from certain activities or otherwise affect
our legal, contractual or intellectual property rights, which could
have a significant adverse effect on our business.
Third-party claims of intellectual property
infringement may prevent or delay our drug discovery and
development efforts.
Our commercial success depends in part on our avoiding infringement
of the patents and proprietary rights of third parties.
There is a substantial amount of litigation involving patent and
other intellectual property rights in the biotechnology and
pharmaceutical industries, including PTO administrative
proceedings, such as inter parties reviews, and reexamination
proceedings before the PTO or oppositions and revocations and other
comparable proceedings in foreign jurisdictions. Numerous U.S. and
foreign issued patents and pending patent applications, which are
owned by third parties, exist in the fields in which we are
developing product candidates. As the biotechnology and
pharmaceutical industries expand and more patents are issued, the
risk increases that our product candidates may give rise to claims
of infringement of the patent rights of others.
Despite safe harbor provisions, third parties may assert that we
are employing their proprietary technology without authorization.
There may be third-party patents, of which we are currently
unaware, with claims to materials, formulations, methods of doing
research or library screening, methods of manufacture or methods
for treatment related to the use or manufacture of our product
candidates. Because patent applications can take many years to
issue, there may be currently pending patent published applications
which may later result in issued patents that our product
candidates may infringe. In addition, third parties may obtain
patents in the future and claim that use of our technologies
infringes upon these patents. If any third-party patents were held
by a court of competent jurisdiction to cover the manufacturing
process of any of our product candidates, any molecules formed
during the manufacturing process or any final product itself, the
holders of any such patents may be able to block our ability to
commercialize such product candidate unless we obtain a license
under the applicable patents, or until such patents expire or they
are finally determined to be held invalid or unenforceable.
Similarly, if any third-party patent were held by a court of
competent jurisdiction to cover aspects of our formulations,
processes for manufacture or methods of use, including combination
therapy or patient selection methods, the holders of any such
patent may be able to block our ability to develop and
commercialize the applicable product candidate unless we obtain a
license, limit our uses, or until such patent expires or is finally
determined to be held invalid or unenforceable. In either case,
such a license may not be available on commercially reasonable
terms or at all.
Parties making claims against us may obtain injunctive or other
equitable relief, which could effectively block our ability to
further develop and commercialize one or more of our product
candidates. Defense of these claims, regardless of their merit,
would involve substantial litigation expense and would be a
substantial diversion of employee resources from our business. In
the event of a successful claim of infringement against us, we may
have to pay substantial damages, including treble damages and
attorneys’ fees for willful infringement, obtain one or more
licenses from third parties, cease marketing our products or
developing our product candidates, limit our uses, pay royalties or
redesign our infringing product candidates, which may be impossible
or require substantial time and monetary expenditure. We cannot
predict whether any such license would be available at all or
whether it would be available on commercially reasonable terms.
Furthermore, even in the absence of litigation, we may need to
obtain licenses from third parties to advance our research or allow
commercialization of our product candidates. 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 one or more of our product candidates, which could
harm our business significantly.
We may not be able to protect our intellectual property
rights throughout the world.
Filing, prosecuting and defending patents on all of our product
candidates throughout the world would be prohibitively expensive.
Competitors may use our technologies in jurisdictions where we have
not obtained patent protection to develop their own products and
further, may export otherwise infringing products to territories
where we have patent protection, but enforcement is not as strong
as that in the U.S. These products may compete with our products in
jurisdictions where we do not have any issued patents and our
patent claims or other intellectual property rights may not be
effective or sufficient to prevent them from so competing.
Many companies have encountered significant problems in protecting
and defending intellectual property rights in foreign
jurisdictions. The legal systems of certain countries, particularly
certain developing countries, do not favor the enforcement of
patents and other intellectual property protection, particularly
those relating to biopharmaceuticals, which could make it difficult
for us to stop the infringement of our patents or marketing of
competing products in violation of our proprietary rights
generally. Proceedings to enforce our patent rights in foreign
jurisdictions could result in substantial cost and divert our
efforts and attention from other aspects of our business.
If we breach any of the agreements under which we
license commercialization rights to our product candidates from
third parties, we could lose license rights that are important to
our business.
We license the use, development and commercialization rights for
some of our product candidates and may enter into similar licenses
in the future. Under our existing license agreements we are subject
to commercialization and development, diligence obligations,
milestone payment obligations, royalty payments and other
obligations. If we fail to comply with any of these obligations or
otherwise breach our license agreements, our licensing partners may
have the right to terminate the license in whole or in part.
Generally, the loss of any one of our current licenses or other
licenses in the future could materially harm our business,
prospects, financial condition and results of operations.
Intellectual property rights do not necessarily address
all potential threats to our competitive
advantage.
The degree of future protection afforded by our intellectual
property rights is uncertain because intellectual property rights
have limitations, and may not adequately protect our business, or
permit us to maintain our competitive advantage. The following
examples are illustrative:
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Others may be able to make compounds that are similar to our
product candidates but that are not covered by the claims of the
patents that we own or have exclusively licensed;
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We
or our licensors or strategic partners might not have been the
first to make the inventions covered by the issued patent or
pending patent application that we own or have exclusively
licensed;
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We
or our licensors or strategic partners might not have been the
first to file patent applications covering certain of our
inventions;
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Others may independently develop similar or alternative
technologies or duplicate any of our technologies without
infringing our intellectual property rights;
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Our pending patent applications may not lead to issued patents;
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Issued patents that we own or have exclusively licensed may not
provide us with any competitive advantages, or may be held invalid
or unenforceable, as a result of legal challenges by our
competitors;
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Our competitors might conduct research and development activities
in countries where we do not have patent rights and then use the
information learned from such activities to develop competitive
products for sale in our major commercial markets;
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We
may not develop additional proprietary technologies that are
patentable; and
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The patents of others may have an adverse effect on our
business.
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Should any of these events occur, they could significantly harm our
business, results of operations and prospects.
Risks Related to Ownership of Our Common Stock
The market price of our common stock may fluctuate
significantly, and investors in our common stock may lose all or a
part of their investment.
The market prices for securities of biotechnology and
pharmaceutical companies have historically been highly volatile,
and the market has from time-to-time experienced significant price
and volume fluctuations that are unrelated to the operating
performance of particular companies. For example, from January 1,
2021 to December 31, 2021, our closing stock price ranged from
$0.24 to $1.22 per share. The market price of our common stock may
fluctuate significantly in response to numerous factors, some of
which are beyond our control, such as:
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actual or anticipated adverse results or delays in our clinical
trials;
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our failure to commercialize our product candidates, if
approved;
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unanticipated serious safety concerns related to the use of any of
our product candidates;
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adverse regulatory decisions;
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changes in laws or regulations applicable to our product
candidates, including but not limited to clinical trial
requirements for approvals;
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legal disputes or other developments relating to proprietary
rights, including patents, litigation matters and our ability to
obtain patent protection for our product candidates, government
investigations and the results of any proceedings or lawsuits,
including, but not limited to, patent or stockholder
litigation;
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our decision to initiate a clinical trial, not initiate a clinical
trial or to terminate an existing clinical trial;
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our dependence on third parties, including CROs;
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announcements of the introduction of new products by our
competitors;
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market conditions in the pharmaceutical and biotechnology
sectors;
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announcements concerning product development results or
intellectual property rights of others;
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future issuances of common stock or other securities;
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the addition or departure of key personnel;
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failure to meet or exceed any financial guidance or expectations
regarding development milestones that we may provide to the
public;
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actual or anticipated variations in quarterly operating
results;
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our failure to meet or exceed the estimates and projections of the
investment community;
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overall performance of the equity markets and other factors that
may be unrelated to our operating performance or the operating
performance of our competitors, including changes in market
valuations of similar companies;
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conditions or trends in the biotechnology and biopharmaceutical
industries;
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introduction of new products offered by us or our competitors;
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announcements of significant acquisitions, strategic partnerships,
joint ventures or capital commitments by us or our competitors;
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issuances of debt or equity securities;
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sales of our common stock by us or our stockholders in the
future;
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trading volume of our common stock;
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ineffectiveness of our internal controls;
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publication of research reports about us or our industry or
positive or negative recommendations or withdrawal of research
coverage by securities analysts;
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failure to effectively integrate the acquired companies’
operations;
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general political and economic conditions;
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effects of natural or man-made catastrophic events;
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effects of public health crises, pandemics and epidemics, such as
the COVID-19 pandemic; and
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other events or factors, many of which are beyond our control.
|
Further, the equity markets in general have recently experienced
extreme price and volume fluctuations. Continued market
fluctuations could result in extreme volatility in the price of our
common stock, which could cause a decline in the value of our
common stock. Price volatility of our common stock might worsen if
the trading volume of our common stock is low. The realization of
any of the above risks or any of a broad range of other risks,
including those described in these “Risk Factors,” could have a
dramatic and material adverse impact on the market price of our
common stock.
We have never paid cash dividends and do not expect to
pay cash dividends in the foreseeable future. Any return on
investment may be limited to the value of our common
stock.
We have never paid cash dividends on our common stock and do not
anticipate paying cash dividends on our common stock in the
foreseeable future. The payment of dividends on our capital stock
will depend on our earnings, financial condition and other business
and economic factors affecting us at such time as the board of
directors may consider relevant. We currently anticipate that we
will re-invest any funds that we receive into the business to
further our business strategy, and not to pay dividends. If we do
not pay dividends, our common stock may be less valuable because a
return on your investment will only occur if the common stock price
appreciates.
A sale of a substantial number of shares of the common
stock may cause the price of our common stock to
decline.
If our stockholders sell, or the market perceives that our
stockholders intend to sell for various reasons, substantial
amounts of our common stock in the public market, including shares
issued in connection with the exercise of outstanding options or
warrants, the market price of our common stock could fall. Sales of
a substantial number of shares of our common stock may make it more
difficult for us to sell equity or equity-related securities in the
future at a time and price that we deem reasonable or appropriate.
We may become involved in securities class action litigation that
could divert management’s attention and harm our business.
The stock markets have from time-to-time experienced significant
price and volume fluctuations that have affected the market prices
for the common stock of biotechnology and biopharmaceutical
companies. These broad market fluctuations may cause the market
price of our common stock to decline. In the past, securities class
action litigation has often been brought against a company
following a decline in the market price of our securities. This
risk is especially relevant for us because biotechnology and
biopharmaceutical companies have experienced significant stock
price volatility in recent years. We may become involved in this
type of litigation in the future. Litigation often is expensive and
diverts management’s attention and resources, which could adversely
affect our business.
Our quarterly operating results may fluctuate
significantly.
We expect our operating results to be subject to quarterly
fluctuations. Our net loss and other operating results will be
affected by numerous factors, including:
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variations in the level of expenses related to our development
programs;
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the addition or termination of clinical trials;
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any intellectual property infringement lawsuit in which we may
become involved;
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regulatory developments affecting our product candidates; and
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our execution of any collaborative, licensing or similar
arrangements, and the timing of payments we may make or receive
under these arrangements.
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If our quarterly operating results fall below the expectations of
investors or securities analysts, the price of our common stock
could decline substantially. Furthermore, any quarterly
fluctuations in our operating results may, in turn, cause the price
of our common stock to fluctuate substantially.
Existing stockholders’ interest in us may be diluted by
additional issuances of equity securities and raising funds through
acquisitions, lending and licensing arrangements may restrict our
operations or require us to relinquish proprietary
rights.
We may issue additional equity securities to fund future expansion
and pursuant to equity incentive or employee benefit plans. We may
also issue additional equity for other purposes. These securities
may have the same rights as our common stock or, alternatively, may
have dividend, liquidation or other preferences to our common
stock. The issuance of additional equity securities will dilute the
holdings of existing stockholders and may reduce the share price of
our common stock.
If we raise additional funds through collaboration, licensing or
other similar arrangements, it may be necessary to relinquish
potentially valuable rights to our product candidates, potential
products or proprietary technologies, or grant licenses on terms
that may not be favorable to us. If adequate funds are not
available, our ability to achieve profitability or to respond to
competitive pressures would be significantly limited and we may be
required to delay, significantly curtail or eliminate the
development of our product candidates.
Our investors could experience substantial dilution of
their investments as a result of subsequent exercises of our
outstanding options, including the CEO Performance Award, or the
grant of future equity awards by us.
As of December 31, 2021, 10 million shares of our common stock were
authorized for issuance under our 2015 Stock Incentive Plan, of
which [8,094,046] million shares of our common stock were subject
to options outstanding at such date at a weighted-average exercise
price of $[0.36] per share. To the extent outstanding options are
exercised, our existing stockholders may incur dilution.
We rely on equity awards to motivate current employees and to
attract new employees. The grant of future equity awards by us to
our employees and other service providers may further dilute our
stockholders.
Our directors and executive officers own a significant
percentage of our capital stock, and they may make decisions that
you do not consider to be in your best interests or those of our
other stockholders.
As of December 31, 2021, our directors and executive officers
beneficially owned, in the aggregate, approximately 52.77% of our
outstanding voting securities. As a result, if some or all of them
acted together, they would have the ability to exert significant
influence over the election of our board of directors and the
outcome of issues requiring approval by our stockholders. This
concentration of ownership may also have the effect of delaying or
preventing a change in control of our company that may be favored
by other stockholders. This could prevent transactions in which
stockholders might otherwise recover a premium for their shares
over current market prices.
Our articles of incorporation, as amended, and bylaws
provide for indemnification of officers and directors at our
expense and limits their liability, which may result in a major
cost to us and hurt the interests of our stockholders because
corporate resources may be expended for the benefit of our officers
and/or directors.
Our articles of incorporation, as amended, bylaws and applicable
Nevada law provide for the indemnification of our directors,
officers, employees, and agents, under certain circumstances,
against attorney’s fees and other expenses incurred by them in any
litigation to which they become a party arising from their
association with or activities on our behalf. We will also bear the
expenses of such litigation for any of our directors, officers,
employees, or agents, upon such person’s promise to repay us,
therefore if it is ultimately determined that any such person shall
not have been entitled to indemnification. This indemnification
policy could result in substantial expenditures by us, which we
will be unable to recover.
We have issued Preferred Stock.
Our articles of incorporation, as amended, authorize the issuance
of up to 5,000,000 shares of preferred stock with designations,
rights and preferences determined from time to time by our Board of
Directors. As of December 31, 2021, of the 5,000,000 preferred
shares authorized: (i) 1,000,000 shares were designated as Series A
Convertible Preferred Stock, of which none were issued and
outstanding, (ii) 500,000 shares were designated as Series B
Convertible Preferred Stock, of which none were issued and
outstanding, and (iii) 500,000 shares were designated as Series C
Convertible Preferred Stock (“Series C Preferred Stock”), of which
500,000 shares were issued and outstanding. The holders of our
Series C Preferred Stock have voting control of the Company. Our
Board of Directors is empowered, without stockholder approval, to
designate and issue preferred stock with dividend, liquidation,
conversion, voting, or other rights which could adversely affect
the voting power or other rights of the holders of the common
stock. The issuance of additional shares of preferred stock could
be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the
Company.
Item
1B. Unresolved Staff Comments
None.
Item
2. Properties
Executive Office and Laboratory Address:
We lease approximately 1,908 sq. ft. of Executive Office and
Laboratory space located at 6191 Cornerstone CT E. Suite 114
San Diego, CA 92121. Base rent is $5,000 per month plus additional
CAM and utility costs. Our current lease expires in April 2023.
Item
3. Legal Proceedings
We are subject to litigation, claims, investigations and audits
arising from time to time in the ordinary course of our business.
However, at this time, we are not aware on any material pending,
threatened or unasserted claims.
Item
4. Mine Safety Disclosure
Not applicable.
PART
II
Item
5. Market for Registrant’s Common Equity and
Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our common stock is currently traded on the OTCQB under trading
symbol “AXIM.” An active public market for our common stock may not
develop or be sustained. Trading of securities on the OTCQB is
often sporadic and investors may have difficulty buying and selling
or obtaining market quotations. Any OTCQB market quotations reflect
inter-dealer quotations, without adjustment for retail mark-up,
mark-down or commission and may not necessarily represent actual
transactions
The following table sets forth the high and low closing bid prices
for our common stock as reported on OTCQB for the following
periods. These prices do not include retail mark-ups, markdowns or
commissions, and may not necessarily represent actual
transactions.
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High ($)
|
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Low ($)
|
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Fiscal Year Ended December 31, 2021
|
|
|
|
|
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|
First Quarter
|
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|
0.85 |
|
|
|
0.41 |
|
|
Second Quarter
|
|
|
1.20 |
|
|
|
0.50 |
|
|
Third Quarter
|
|
|
0.99 |
|
|
|
0.56 |
|
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Fourth Quarter
|
|
|
0.56 |
|
|
|
0.26 |
|
|
|
|
|
|
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|
|
|
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|
Fiscal Year Ended December 31, 2020
|
|
|
|
|
|
|
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First Quarter
|
|
|
0.51 |
|
|
|
0.12 |
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Second Quarter
|
|
|
0.67 |
|
|
|
0.12 |
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Third Quarter
|
|
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1.05 |
|
|
|
0.24 |
|
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Fourth Quarter
|
|
|
0.68 |
|
|
|
0.41 |
|
As of April 12, 2022, there are 73 holders of record of our common
stock. This number does not include beneficial holders of our
common stock. Because many of our shares of common stock are held
by brokers and other institutions on behalf of shareholders, we are
unable to estimate the total number of shareholders represented by
these record holders.
Dividends
We have never declared or paid cash dividends on our common stock.
We anticipate that in the future we will retain any earnings for
operation of our business. Accordingly, we do not anticipate
declaring or paying any cash dividends in the foreseeable
future.
Securities Authorized for Issuance Under Equity
Compensation Plans
Effective May 29, 2015 the company adopted its 2015 Stock Incentive
Plan under which eligible persons or vendors whom provide the
company services may be afforded an opportunity to acquire an
equity interest in the company in exchange for those services
provided.
The following table provides information as of December 31, 2021,
regarding our equity compensation plans:
|
Plan Category
|
|
Number of securities
to
be issued
upon exercise of
outstanding options,
warrants and rights
|
|
|
Weighted-average
exercise price
of
outstanding options,
warrants and rights
|
|
|
Number of securities
remaining available
for future issuance
under equity
compensation plans
|
|
|
Equity compensation plans approved by security holders
|
|
|
10,960,715 |
|
|
$ |
10,960,715 |
|
|
|
0 |
|
|
Equity compensation plans not approved by security holders
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Total
|
|
|
10,960,715 |
|
|
$ |
10,90,715 |
|
|
|
0 |
|
Unregistered Sales of Equity Securities and Use of
Proceeds
The Company did not sell any securities that were not registered
under the Securities Act of 1933, as amended, during fiscal year
2021 that have not already been reported on a Current Report on
Form 8-K or a Quarterly Report on Form 10-Q.
During the year ended December 31, 2021 the Company entered into
Various Stock Purchase agreements which generated cash of
$1,252,000.
Issuer Repurchases of Equity Securities
None.
Item
6. [Reserved]
Item
7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis of our financial
condition and results of operations for the years ended December
31, 2021 and 2020 should be read in conjunction with the financial
statements and the notes to those statements that are included
elsewhere in this Annual Report on Form 10-K. Our discussion
includes forward-looking statements based upon current expectations
that involve risks and uncertainties, such as our plans,
objectives, expectations and intentions. Actual results and the
timing of events could differ materially from those anticipated in
these forward-looking statements as a result of a number of
factors. We use words such as “anticipate,” “estimate,” “plan,”
“project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,”
“may,” “will,” “should,” “could,” and similar expressions to
identify forward-looking statements.
Liquidity and Capital Resources
We are in our early stages of development and growth, without
established records of sales or earnings. We will be subject to
numerous risks inherent in the business and operations of
financially unstable and early stage or emerging growth
companies.
As of December 31, 2021, we had cash and cash equivalents of
$452,963, working capital deficit of $(1,944,381), and an
accumulated deficit of $57,882,227. We estimate our G&A
expenses for 2022 to be approximately $3,500,000, which includes
projected audit and accounting costs of $250,000. R&D expenses
for 2022 will vary based on drug formulation and clinical trial
project activity that the Company is engaged in, which in turn is
determined by available capital. We do not expect R&D
expenditures to exceed $2 million in 2022.
We can provide no assurance that the Company can continue to
satisfy its cash requirements for at least the next twelve
months.
We expect to obtain financing through shareholder loans, private
placements and/or registered offerings of our securities.
Shareholder loans may be without stated terms of repayment or
interest. In addition, we may consider taking on long-term or
short-term debt from financial institutions in the immediate
future. Shareholders loans may be granted from time to time as
required to meet current working capital needs. We have no formal
agreement that ensures that we will receive such loans. We may
exhaust this source of funding at any time.
We are dependent upon certain related parties to provide continued
funding and capital resources. If continued funding and capital
resources are unavailable at reasonable terms, we may not be able
to implement our plan of operations. These loans may include terms
that may be highly dilutive to existing shareholders.
On September 14, 2017, our Registration Statement on Form S-3 was
declared effective by the SEC. We issued 7,494,792 shares common
stock pursuant to the Company’s Registration Statement on Form S-3
during the year ending December 31, 2020. No shares were issued in
2021 under the S-3.
On June 22, 2021, our Registration Statement on Form S-1 was
declared effective by the SEC. We issued 1,000,000 shares of
Company common stock pursuant to an equity purchase agreement,
dated on May 14, 2021, and the Registration Statement on Form S-1
during the year ending December 31, 2021. Subsequent to the year
ended December 30, 2021, the Company issued an additional 4,000,000
shares of its common stock for cash of $484,126 pursuant to the
equity purchase agreement, which shares were also registered
pursuant to the S-1 Registration Statement.
During January 2022, the Company issued 612,104 shares for cash of
gross proceeds of $75,000 pursuant to various stock purchase
agreements. The cash was received in the fourth quarter 2021 and
first quarter 2022. The Company also issued warrants to purchase an
aggregate of 612,104 shares of common stock at an average exercise
price of $0.315 per share. The warrants are exercisable within a
three year period from issuance.
Effective February 10, 2022, the Company issued two short term
notes, each having a face amount of $250,000, in exchange for a
total of $500,000 in cash (the “Short Term Promissory Notes”). The
Short Term Promissory Notes bear interest at the rate of 1.5% per
annum and were due and payable on or before March 10, 2022, unless
demand for payment is made prior to such date. One of the two notes
was paid in full on February 14, 2022.
Effective February 10, 2022, the Company issued seven convertible
notes to a series of investors having an aggregate face value of
$1,325,000 in exchange for $1,325,000 in cash (the “Convertible
Notes”). One of the Convertible Notes, face value $25,000, was
purchased by Blake N. Schroeder who is a director of the
Company.
Each of the Convertible Notes is (i) unsecured; (ii) bears interest
at a rate of 3% per annum; (iii) matures on February 10, 2032; and
(iv) is convertible, in whole or in part, at any time by the
holder, into restricted shares of the Company’s common stock at a
conversion price equal to the lesser of $0.08125 or 70% of the
average of the two lowest closing prices of the Company’s common
stock in the ten trading days preceding any particular conversion,
provided, the holder is prohibited from converting the convertible
note, or portion thereof, if such conversion would result in
beneficial ownership by the holder and its affiliates of more than
4.99% of Company’s issued and outstanding common stock as of the
date of the conversion.
On February 10, 2022, the Company paid in full the remaining
balance due on that certain convertible note issued to GS Capital
Partners, LLC, face value $1,110,000 (as amended, the “GS Note”).
In connection with the repayment, the Company was required to pay
accrued interest in the amount of $21,875, by issuing 173,390
restricted shares of the Company’s common stock pursuant to the
formula set forth in the GS Note.
In March 2022, the Company issued 624,290 of its shares of common
stock pursuant to a stock purchase agreement for cash gross
proceeds of $55,000.
In January 2022 the company issued 7,000,000 of its shares in
completion of its agreement with Advanced Tear Diagnostics
regarding the purchase of various patents.
In December 2019, a novel strain of coronavirus (“COVID-19”) was
reported in Wuhan, China. The COVID-19 pandemic, as it was declared
by the World Health Organization, has continued to spread and has
already caused severe global disruptions. The extent of COVID-19’s
effect on our operational and financial performance will depend on
future developments, including the duration, spread and intensity
of the pandemic, all of which are uncertain and difficult to
predict considering the rapidly evolving landscape.
We expect COVID-19, along with the resulting government-imposed
restrictions on businesses, to negatively impact our operations due
to decreased consumer demand as well as potential production and
warehouse limitations which results in an event or condition,
before consideration of management’s plans, that could impact our
ability to meet future obligations. We believe that our cash and
cash equivalents on hand and these cost reduction measures, as
needed, will provide sufficient liquidity to fund our operations
for the next 12 months from the issuance of the consolidated
financial statements.
Sources of Capital
We expect to sustain our working capital needs through shareholder
loans, private placements and/or registered offerings of our
securities. Shareholder loans may be without stated terms of
repayment or interest. We may consider taking on any long-term or
short-term debt from financial institutions in the immediate
future. Shareholders loans may be granted from time to time as
required to meet current working capital needs. We have no formal
agreement that ensures that we will receive such loans. We may
exhaust this source of funding at any time.
During the next twelve months, we anticipate incurring costs
related to:
|
|
(i)
|
filing Exchange Act reports;
|
|
|
(ii)
|
contractual obligations;
|
|
|
(iii)
|
building inventory of our approved devices;
|
|
|
(iii)
|
clinical trials; and
|
|
|
(iv)
|
continued research and development of our diagnostic tests.
|
We believe we will be able to meet these costs through use of funds
in our treasury, deferral of fees by certain service providers and
additional amounts, as necessary, to be loaned to or invested in us
by our shareholders, management or other investors. As of the date
of the period covered by this report, we have limited cash. There
are no assurances that we will be able to secure any additional
funding as needed. Currently, however our ability to continue as a
going concern is dependent upon our ability to generate future
profitable operations and/or to obtain the necessary financing to
meet our obligations and repay our liabilities arising from normal
business operations when they come due. Management’s plan includes
obtaining additional funds by equity financing and/or related party
advances; however, there is no assurance of additional funding
being available.
Known Trends or Uncertainties
We have seen some consolidation in the pharmaceutical and
biotechnology industries during economic downturns. These
consolidations have not had a negative effect on us to date;
however, should consolidations and downsizing in the industry
continue to occur, those events could adversely impact our
financial results and business operations going forward.
The potential for growth in new markets is uncertain. We will
continue to explore these opportunities until such time as we
either generate sales or determine that resources would be more
efficiently used elsewhere.
As discussed in this Annual Report, the world has been affected due
to the COVID-19 pandemic. The pandemic has negatively impacted our
business in various ways over the last two years, including, more
recently, as a result of global supply chain constraints at least
partially attributable to the pandemic. Until the pandemic has
passed, there remains uncertainty as to the effect of COVID-19 on
our business in both the short and long-term.
Inflation
Inflation has increased during the periods covered by this Annual
Report, and is expected to continue to increase for the near
future. Inflationary factors, such as increases in the cost of our
products (and components thereof), interest rates, overhead costs
and transportation costs may adversely affect our operating
results. Although we do not believe that inflation has had a
material impact on our financial position or results of operations
to date, we may experience some effect in the near future
(especially if inflation rates continue to rise) due to supply
chain constraints, consequences associated with COVID-19 and the
ongoing conflict between Russia and Ukraine, employee availability
and wage increases, trade tariffs imposed on certain products from
China and increased product pricing due to semiconductor product
shortages.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or
capital resources that is material to investors.
Going Concern
The Company’s financial statements have been presented assuming
that the Company will continue as a going concern. As shown in the
financial statements, the Company has negative working capital of
$1,944,381, has an accumulated deficit of $57,882,227, has cash
used in continuing operating activities of $2,478,769 and presently
does not have the resources to accomplish its objectives during the
next twelve months. These conditions raise substantial doubt about
the ability of the Company to continue as a going concern. The
financial statements do not include any adjustments related to the
recoverability of assets and classification of liabilities that
might be necessary should the Company be unable to continue in
operation.
The Company may not be able to meet its contractual obligations to
Arizona State University regarding ongoing research and
maintain its staff at current levels required by various
employment agreements.
The Company intends to raise additional capital through private
placements and/or registered offerings of debt and equity
securities, but there can be no assurance that these funds will be
available on terms acceptable to the Company or will be sufficient
to enable the Company to fully complete its development activities
or sustain operations. If the Company is unable to raise sufficient
additional funds, it will have to develop and implement a plan to
further extend payables, reduce overhead, or scale back its current
business plan until sufficient additional capital is raised to
support further operations. There can be no assurance that such a
plan will be successful.
Results of Operations
Comparison of the year ended December 31, 2021 and
2020.
|
|
|
December 31,
2021
|
|
|
December 31,
2020
|
|
|
$
Change
|
|
|
%
Change
|
|
|
Revenues
|
|
$ |
60,460 |
|
|
$ |
- |
|
|
$ |
60,460 |
|
|
> |
100 |
% |
|
Gross margin percentage
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Operating expenses
|
|
|
14,035,458 |
|
|
|
4,948,998 |
|
|
|
9,086,460 |
|
|
> |
100 |
% |
|
Loss from continuing operations
|
|
|
(13,974,998 |
) |
|
|
(4,948,998 |
) |
|
|
(9,026,000 |
) |
|
> |
100 |
% |
|
Loss from discontinued operations
|
|
|
(7,996 |
) |
|
|
(119,293 |
) |
|
|
111,297 |
|
|
|
93.30 |
% |
|
Other expenses (income)
|
|
|
2,049,311 |
|
|
|
1,341,589 |
|
|
|
707,722
|
|
|
|
52.75 |
% |
|
Net loss
|
|
$ |
(16,032,305 |
) |
|
|
(6,409,880 |
) |
|
|
(9,622,425 |
) |
|
> |
100 |
% |
Revenue
Revenues from continuing operations recognized for twelve months
ended December 31, 2021 and 2020 amounted to $60,460 and $-0-,
respectively. Revenues from discontinued operations recognized for
twelve months ended December 31, 2021 and 2020 amounted to, $0 and
$7,990, respectively. The decrease is primarily due to discontinued
sale activities of Wellness gum in 2020. The increase in revenue
from continuing operations is due to Co-production agreement with
empowered diagnostics, which has since been terminated.
Cost of Revenue
Cost of Revenue from continuing operations recognized for twelve
months ended December 31, 2021 and 2020 amounted to $-0- and $-0-,
respectively. Cost of Revenue from discontinued operations
recognized for twelve months ended December 31, 2021 and 2020
amounted to, $0 and $2,893, respectively. The decrease in COGS is
due to lack of sales of products to customers in 2021 The decrease
is primarily due to discontinued sale activities of Wellness gum in
2020.
Operating Expenses
Research and Development Expenses
For the twelve months ended December 31, 2021 and 2020 the Company
incurred research and development expenses of $284,869 and $426,708
from continuing operations, respectively. For the twelve months
ended December 31, 2021 and 2020 the Company incurred research and
development expenses of $-0- and $359,251 from discontinued
operations, respectively. The decrease is primarily due to
discontinued research and clinical activities of Wellness gum in
2020.
Selling, General and Administrative Expenses
Our Selling, General and Administrative expenses for the years
ending in 2021 and 2020 were $5,668,450 and $4,506,289,
respectively. The increase is primarily due to services in legal,
consulting and accounting, advertising and increase in salaries
because of the acquisition of Sapphire Biotech on March 2020.
Depreciation Expenses
For the year ended December 31, 2021 our depreciation expenses were
$27,779 as compared to $16,001 for the year ended December 31,
2020. The increase is primarily due to recognizing the property and
equipment as a result of the acquisition of Sapphire Biotech on
March 17, 2020.
Amortization Expenses
For the year ended December 31, 2021 our amortization expenses were
$2,087,908 as compared to $0 for the year ended December 31, 2020.
The increase is primarily due to recognizing the intangible assets
as a result of the acquisition of Sapphire Biotech and patents and
510(K) license from advanced Tear Diagnostics, LLC in 2021.
Impairment Loss
For the year ended December 31, 2021 we recorded an impairment loss
of $5,966,452 as compared to $0 for the year ended December 31,
2020. The company impaired it IPR&D and goodwill assets created
on acquisition of Sapphire resulting from an FDA decision not to
approve our COVID test.
Other Income and Expenses
Our interest expenses for the years ending 2021 and 2020 were
$247,792 and $234,754, respectively. Loss on extinguishment of debt
for the years ending in 2021 and 2020 were $1,587,027 and $923,605
respectively, variance was result of debt exchange and true-up
adjustment for stock compensation. Amortization of debt discount
was $238,033 and $86,059 respectively. The change to the FMV in
marketable securities for years ending in 2021 and 2020 resulted in
unrealized gain (loss) and realized gain (loss) of $0 and
$(104,705), and $0 and $(109,040), respectively. Income grants from
government for the year ending 2021 and 2020 were $279,981 and
$115,899, respectively, and the variance was a result of receiving
innovation research grants from NCI in 2020.
For the Year Ended December 31, 2021 and 2020
Net Cash Provided by/Used in Operating Activities
Net cash used in continuing operating activities and discontinued
operating activities was $2,478,769 and $7,996, respectively, for
the twelve months ended December 31, 2021, as compared to net cash
used of $2,000,097 and $1,215,602 for the twelve months ended
December 31, 2020. The cash used in operating activities is
primarily attributable to our net loss from operations of
$16,024,309 and offset by net changes in the balances of operating
assets and liabilities and non-cash expenses. For the twelve months
ended December 31, 2021, stock-based compensation was $1,143,730
and amortization of debt discount was $238,033. For the twelve
months ended December 31, 2020 these non-cash expenses were
stock-based compensation of $2,311,935 and amortization of $86,059.
For the twelve months ended December 31, 2021 and 2020 the Company
recorded increase to accounts payable and accrued expenses of
$277,507 and $532,245, respectively, of continuing operating
activities. The Company recorded for the twelve months ended
December 31, 2021 and 2020 a loss on extinguishment of debt of
$1,587,027 and $923,604, respectively, and unrealized gain (loss)
on marketable securities of $0 and $(104,705), respectively, and
realized gain (loss) on marketable securities of $0 and $(109,040),
respectively.
Net Cash provided by Investing Activities
Net cash used in (provided by) investing activities during the
period ended December 31, 2021 was $50,495 compared to ($9,980) for
the same period in 2020 due to acquisition of patents $10,000 and
purchase of equipment of $40,495.
Net Cash Provided by Financing Activities
Net cash provided by financing activities during the twelve months
period ended December 31, 2021, was $2,533,042, including $0 used
in discontinued financing activities, compared to $3,151,270 for
the same period in 2020, including $65,000 used in discontinued
financing activities. The Company has successfully raised
significant capital in exchange for its common stock for the twelve
months ended December 31, 2021.
Critical Accounting Policies
The preparation of financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities, the
disclosure of contingent assets and liabilities and the reported
amounts of revenue and expenses during the reported periods. The
more critical accounting estimates include estimates related to
revenue recognition and accounts receivable allowances. We also
have other key accounting policies, which involve the use of
estimates, judgments and assumptions that are significant to
understanding our results, which are described in Note 4 to our
consolidated financial statements.
Our management’s discussion and analysis of financial condition and
results of operations is based on our consolidated financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States, or GAAP. The
preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities and expenses and the disclosure of contingent assets
and liabilities in our consolidated financial statements during the
reporting periods. These items are monitored and analyzed by us for
changes in facts and circumstances, and material changes in these
estimates could occur in the future. We base our estimates on
historical experience, known trends and events, and on various
other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that
are not readily apparent from other sources. Changes in estimates
are reflected in reported results for the period in which they
become known. Actual results may differ materially from these
estimates under different assumptions or conditions.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell
an asset, or paid to transfer a liability, in an orderly
transaction between market participants. A fair value hierarchy has
been established for valuation inputs that gives the highest
priority to quoted prices in active markets for identical assets or
liabilities and the lowest priority to unobservable inputs.
Research and Development Costs
Research and development costs are expensed as incurred. Research
and development reimbursements and grants are recorded by us as a
reduction of research and development cost
Share-Based Payments
We estimate the fair value of each stock option award at the grant
date by using the Black-Scholes option pricing model. The fair
value determined represents the cost for the award and is
recognized over the vesting period during which an employee is
required to provide service in exchange for the award. We account
for forfeitures of stock options as they occur.
Income Taxes
We use the asset and liability method to calculate deferred taxes.
Deferred taxes are recognized based on the differences between the
financial reporting and income tax bases of assets and liabilities
using the enacted tax rates and laws that will be in effect when
the differences are expected to reverse. We review deferred tax
assets for a valuation allowance based upon whether it is more
likely than not that the deferred tax asset will be fully realized.
A valuation allowance, if necessary, is provided against deferred
tax assets, based upon our assessment as to their realization.
We recognize tax when the positions meet a “more-likely-than-not”
recognition threshold. There were no tax positions for which it is
considered reasonably possible that the total amounts of
unrecognized tax benefits will significantly increase or decrease
within the next year. We recognize interest related to unrecognized
tax benefits in interest expense and penalties in operating
expenses.
Recently Issued Accounting Standards
Note 6 to consolidated financial statements appearing
elsewhere in this report includes Recently Issued Accounting
Standards.
Foreign Currency Transactions
Foreign exchange gain (loss) in the year ended December 31, 2021
was $(9,714) compared to $(7,324) for the same period in 2020. All
foreign currency gain (loss) were related to discontinued
operations.
Item
7A. Quantitative and Qualitative Disclosures About Market
Risk
Not applicable to a “smaller reporting company” as defined in Item
10(f)(1) of Regulation S-K.
Item
8. Financial Statement and Supplementary Data
The full text of the Company’s consolidated financial statements
for the fiscal years ended December 31, 2021 and 2020, begins on
page F-1 of this Annual Report on Form 10-K.
Item
9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item
9A. Controls and Procedures
Evaluation of Disclosure Controls and
Procedures
We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our reports
filed pursuant to the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
SEC’s rules, regulations and related forms, and that such
information is accumulated and communicated to our principal
executive officer and principal financial officer, as appropriate,
to allow timely decisions regarding required disclosure.
As of December 31, 2021, we carried out an evaluation, under the
supervision and with the participation of our principal executive
officer and our principal financial officer of the effectiveness of
the design and operation of our disclosure controls and procedures.
Based on this evaluation, our principal executive officer and our
principal financial officer concluded that our disclosure controls
and procedures were effective as of the end of the period covered
by this report.
Management’s Annual Report on Internal Control over
Financial Reporting
The Company’s management is responsible for establishing and
maintaining adequate internal control over financial reporting, as
such term is defined in rule 13a-15(f) of the Exchange Act. The
Company’s internal control system is designed to provide reasonable
assurance to the Company’s management and Board of Directors
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with GAAP. The Company’s internal control over financial
reporting includes those policies and procedures that:
|
|
·
|
Pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of
the assets of the Company;
|
|
|
|
|
|
|
·
|
Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with GAAP, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of
management and directors of the Company; and
|
|
|
|
|
|
|
·
|
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the financial
statements.
|
These limitations preclude the board and management from having
absolute assurance of the achievement of the entity’s objectives.
Even an effective control system provides reasonable but not
absolute assurances.
An evaluation was performed under the supervision and with the
participation of the Company’s management of the effectiveness of
the design and operation of the Company’s procedures and internal
control over financial reporting as of December 31, 2021. In making
this assessment, the Company used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework as updated as of
2017. Based on that evaluation, the Company’s management concluded
that the Company’s internal controls over financial reporting were
effective as of December 31, 2021. Management, board of directors,
and other personnel use judgment every day to select, develop, and
deploy controls across the Company. Management, among other
personnel apply judgement as they monitor and assess the
effectiveness of the system of internal control.
Attestation Report of the Registered Public Accounting
Firm
This Annual Report on Form 10-K does not include an attestation
report of our registered public accounting firm regarding internal
control over financial reporting. Management’s report was not
subject to attestation by the Company’s registered public
accounting firm pursuant to the Dodd-Frank Wall Street Reform and
Consumer Protection Act, wherein non-accelerated filers are exempt
from Sarbanes-Oxley internal control audit requirements.
Changes in Internal Control over Financial
Reporting
The Company has formal Compensation, Audit, Nominating and
Governance Committees. Management and the Board established
controls over financial reporting through policies and procedures
that help ensure that management’s directives to mitigate risks to
the achievement of objectives are carried out. Control activities
are performed at all levels of the entity, at various levels within
day-to-day procedures, and over technology environment. The
Company’s control over financial reporting includes combination of
preventive and detective controls and encompass a range of manual
and automated activities such as authorizations and approvals,
verifications, reconciliations, and business performance
reviews.
Inherent Limitations of Internal Controls
Internal control provides reasonable assurance of achieving
entity’s objectives, limitations do exist. Internal control cannot
prevent bad judgment or decisions, or external events that can
cause the Company to fail to achieve its operational goals.
However, even an effective system of internal control can
experience a failure. The limitations include, but not limited to:
suitability of objectives established as a precondition to internal
control; reality that human judgment in decision making can be
faulty and subject to bias; breakdowns that can occur because of
human failures such as simple errors; ability of management to
override internal control; ability of management, other personnel,
and/or third parties to circumvent controls through collusion;
external events beyond the organization’s control. Notwithstanding
these inherent limitations, management is aware of them when
selecting, developing, and deploying controls that minimize, to the
extent practical, these limitations. Segregation of duties is built
into the selection and development of control activities. Where
segregation of duties is not practical, management selects and
develops alternative control activities. Ongoing evaluations are
built into business process at different hierarchy levels of the
Company and provide timely information. Findings are evaluated
against criteria established by regulations, recognized
standard-setting bodies or management and the board of directors,
and deficiencies are communicated to management and the board of
directors as appropriate.
Item
9B. Other Information
None.
Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
Not applicable.
PART
III
Item
10. Directors, Executive Officers and Corporate
Governance
Directors, Executive Officers and Key Employees of
AXIM
Our current executive officers, key employees and directors are
listed in the below table. There are no arrangements, agreements or
understandings between non-management security holders and
management under which non-management security holders may directly
or indirectly participate in or influence the management of our
affairs. There are no arrangements or understandings between any
director and any other person pursuant to which any director or
executive officer was or is to be selected as a director or
executive officer, as applicable. There currently are no legal
proceedings, and during the past ten years there have been no legal
proceedings, that are material to the evaluation of the ability or
integrity of any of our directors or director nominees.
|
NAME
|
|
AGE
|
|
POSITION
|
|
John W. Huemoeller II
|
|
66
|
|
Chief Executive Officer, President
|
|
Catalina Valencia
|
|
73
|
|
CEO Sapphire Biotechnologies
|
|
Robert Malasek
|
|
53
|
|
Chief Financial Officer, Secretary
|
|
Joseph Tauber, MD
|
|
65
|
|
Chief Medical Officer
|
|
Timothy R. Scott, PhD
|
|
69
|
|
Director
|
|
Robert Cunningham
|
|
74
|
|
Director
|
|
Peter O’Rourke
|
|
49
|
|
Director
|
|
Blake N. Schroeder
|
|
46
|
|
Director
|
The background of our executive officers, key employees and
directors is as follows:
John W. Huemoeller II - Chief Executive Officer,
President
Mr. Huemoeller was appointed as the Company’s Chief Executive
Officer on January 2, 2019 and as a director on our Board of
Directors since May 18, 2017. Mr. Mr. Huemoeller has over 30 years’
experience in financial markets and publicly traded companies
including investment banking, corporate finance, executive
management, sales and marketing, mergers and acquisitions,
leveraged buyouts and private placements of securities. Since April
2015 to the present, Mr. Huemoeller has been the chief executive
officer and president of Air Water Earth Inc. From March 2013 to
January 2016, he was chairman, chief executive officer and chief
financial officer of Propell Technologies Group Inc. From April
2012 to March 2013, Mr. Huemoeller served as the president of
Joshua Tree Capital Inc. Mr. Huemoeller has held Series 3, 7, 24,
63 and 79 Securities Licenses, was registered with various state
insurance boards, the Chicago Board of Trade as a commodities
broker, and worked for various broker-dealers throughout his career
including Smith Barney, Drexel Burnham, Prudential Securities, and
Paine Webber. Mr. Huemoeller is co-author of U.S. Patent
#5,855,005.
Robert Malasek - Chief Financial Officer,
Secretary
Mr. Malasek has served as the Company’s Chief Financial Officer
since June 29, 2016. Mr. Malasek’s experience includes serving as
the Assistant Controller for Starwood Hotel & Resorts
Worldwide, Inc., Controller for Pacific Crest Equity Partners (a
private equity company), and Chief Financial Officer for
NatureWell, Inc. From 2011 to 2015, Robert served as the Chief
Financial Officer, Secretary, Treasurer and a Director of Liberty
Coal Energy Corp. Since 2015, Robert has served as the Chief
Financial Officer of Cannalink, Inc. Robert received his Bachelor
of Science in Accountancy from San Diego State University.
Joseph Tauber, MD – Chief Medical Officer
Mr. Tauber has served as the Company’s Chief Medical Officer since
September 21, 2021. Dr. Tauber is the founder and CEO of Tauber Eye
Center, a practice focused on corneal disease, uveitis and ocular
immunology and complex corneal surgical procedures as well as
Medical Director of Saving Sight, the US’ third largest eye
bank.
Dr. Tauber has been centrally involved in virtually every
significant dry eye development project during the past 25 years.
He has served as a Principal Investigator in over 140 multicenter
clinical trials including those that led to the approval of all
four medications currently approved by the FDA for the treatment of
dry eye – Restasis, Xiidra, Cequa and Eyesuvis. He has been avidly
involved in research for nearly three decades, and a principal
investigator in over 140 research studies across a broad range of
eye conditions, including high-risk corneal transplantation,
inflammation and allergic eye diseases, corneal infectious diseases
and numerous ocular surface conditions.
Dr. Tauber received his doctorate from Harvard Medical School,
residency training in internal medicine at Beth Israel Hospital and
in ophthalmology at Tufts-New England Medical Center, and
fellowship training in Ocular Immunology and in Corneal Diseases
and Surgery at the Massachusetts Eye & Ear Infirmary, all in
Boston, Massachusetts.
Dr. Tauber has also written eight book chapters and over 80
peer-reviewed articles in the fields of ocular surface and
immunologic disease for prestigious medical journals as
Ophthalmology, Investigative Ophthalmology and Visual Science,
Journal of Cataract and Refractive Surgery and Cornea. He has been
awarded the Heed Ophthalmic Foundation Fellowship Award and a
National Eye Institute Individual NRSA Award..
Timothy R. Scott, PhD - Director
Dr. Scott has served as a director on our Board of Directors since
May 18, 2017, and has also served on the Board of Directors of
Medical Marijuana, Inc. from March 2015 to the present. From
September 2001 to May 2008, Dr. Scott served on the board of
directors of Naturewell, Incorporated, a publicly traded company
engaged in the nutraceutical and homeopathic drug business. From
1998 to 2000, Dr. Scott served as a member of the board of
directors of ICH Corporation, an American Stock Exchange listed
company, which owned 265 fast food and family dining restaurants
having approximately $265 million in revenues and 7,800 employees,
and as a member of ICH’s compensation committee. Dr. Scott has
served as chairman of the board of directors, president and senior
pastor of a 2,500-member church located in San Diego, California
from 1992 to the present. He also has served as chairman and
president of Project Reach World, Inc., a 501(c)(3) charitable
organization from 1995 to the present. He received his Ph.D. in
Theology from Christian University in 1981 and served as a
Professor of Philosophy and Religion at Pacific International
College from 1981 to 1985.
Robert Cunningham - Director
Robert “Bob” Cunningham has served as a director on our Board of
Directors since May 18, 2017. Mr. Cunningham has over 40 years of
executive management experience in financial services and venture
capital. From August 2011 to the present, he serves as the chief
executive officer of Preferred Dealer Programs LLC, a venture
funded firm developing electronic payment technologies for banks.
Prior to joining PDP, from January 1985 to December 2006, he was
the founding partner in Placer Financial Group, a nationwide
mortgage and real estate development company. Mr. Cunningham also
served as Trustee for the U.S. Department of Justice, and as a
member of the board for numerous firms, including Allied Commercial
Corporation, Vermillion Development, Pacific Building Industries
Corporation and Bond HD Hospitality Group. From March 2015 to the
present, Mr. Cunningham has served on the board of directors of
Medical Marijuana, Inc.
Peter O’Rourke – Director
Mr. O’Rourke has served as a director on our Board of Directors
since July 21, 2020. Mr. O’Rourke’s background includes holding
leadership roles in management consulting, private equity,
aerospace and operations companies. Mr. O’Rourke’s experience
includes leadership in sales, marketing, operations, finance and
performance improvement. In 2018, Mr. O’Rourke was appointed Acting
Secretary of the U.S. Department of Veterans Affairs after serving
as the Chief of Staff and Executive Director for the Office of
Accountability and Whistleblower Protection. Before joining the
Department of Veterans Affairs, Mr. O’Rourke honorably served as a
U.S. Navy enlisted Airman and an Air Force Officer and Logistician.
Mr. O’Rourke received a Bachelor of Arts in Political Science from
the University of Tennessee in Knoxville as well as a Master of
Science in Logistics and Supply Chain Management from the United
States Air Force’s Institute of Technology.
Blake N. Schroeder
Mr. Schroeder has served as a director on our Board of Directors
since January 6, 2022. Mr. Schroder began his career with a
commercial litigation law firm in Salt Lake City, Utah. Beginning
in 2008, Schroeder focused on the sale and marketing of natural
products and opening international marketplaces to those products.
From 2008 to 2014 Mr. Schroeder served in various capacities at
MonaVie, LLC developing international business plans and growing
international businesses. From August 2014 to February 2016, Mr.
Schroeder served as the Chief Operating Officer of Forevergreen
International, where he was responsible for global operation and
sales of the multinational organization, including oversight of a
global supply chain. From 2021 to the present, Mr. Schroeder has
served as the Chief Executive Officer and Chairman of the Board of
Medical Marijuana, Inc. From 2016 to the present, Mr. Schroeder
serves as the chief executive officer of Kannaway USA, LLC, a
wholly owned subsidiary of Medical Marijuana, Inc. Medical
Marijuana, Inc. is one of the Company’s largest shareholders
holding approximately 16.4% of the Company’s common stock, as of
January 10, 2022. Mr. Schroeder holds a B.S. in Finance from Utah
State University and a law degree from Syracuse University College
of Law.
Officers of Sapphire Biotech,
Inc.
Catalina Valencia, J.D
Chief Executive Officer and Co-Founder - Sapphire Biotech,
Inc.
Catalina specialized in leading enterprises to success through the
strategic development of businesses and products. Her career focus
has been on start-ups and small businesses in the biotech industry
starting with Genentech. Early in her legal career, Catalina joined
the Rio de Janeiro office of Cleary, Gottlieb, Steen & Hamilton
as an Associate Attorney where she represented American companies
seeking to enter into joint ventures with Brazilian enterprises. In
the Bay Area, she was recruited by Itel, a Wall Street success
story that declared a historic bankruptcy due to its size just one
year after she joined the company. She successfully completed the
disposition of over $1 Billion in executory contracts, enabling the
company to emerge from bankruptcy. Subsequently, Catalina was
recruited by Genentech, Inc., the premier biotech pioneer, during
the company’s early start-up phase. Catalina’s accomplishments
included structuring ventures which formed the basis for
Genentech’s international expansion. Catalina has been the
co-founder of several companies, most recently Sapphire Biotech,
all with a mission to develop pioneering scientific technologies
with life-saving potential. Catalina graduated Magna Cum Laude,
Highest Department Honors, with a B.A. degree from UCLA and
received her J.D. Degree from the University of California,
Berkeley School of Law. Her scholastic achievements include an
Alumni Scholarship to UCLA, Fellowship to Berkeley Law School,
Teaching Fellowship to Stanford Law School and Fulbright Fellowship
to Brazil.
Dr. Sergei A. Svarovsky, Ph.D, MBA
Chief Scientific Officer and Co-Founder - Sapphire Biotech,
Inc.
Dr. Svarovsky is the scientific founder of Sapphire. He brings to
the Company a breadth of experience and expertise from his
academic, government and industry careers in the fields of
medicinal chemistry and medical diagnostics. He has authored over
25 peer reviewed publications, reviews and book chapters,
contributed to at least 20 international and U.S. patents and
participated in over 50 international symposia. Some of his patents
has been licensed by Pfizer, BioRad, among others. He serves on
Editorial Boards of several international journals in the fields of
chemistry, medical technology and nanotechnology and is a reviewer
for a number of national and international funding organizations
including National Science Foundation, National Institutes of
Health, Israeli Science Foundation, and Georgian Science
Foundations. Dr. Svarovsky obtained a PhD in Physical Organic
Chemistry and MBA in Finance from University of West Virginia in
2000. Prior to entering the biopharma industry, Dr. Svarovsky
served as a Postdoctoral Fellow at the Laboratory of Medicinal
Chemistry at the National Cancer Institute. In 2006 he became an
Associate Professor at the Biodesign Institute at Arizona State
University where he met with another co-founder of Sapphire, Dr.
Douglas Lake. Dr. Svarovsky joins Axim Biotechnologies, Inc. in the
role of Chief Scientific Officer with a mission to develop novel
therapeutics modalities and diagnostics for the treatment and
detection of cancer.
Dr. Douglas Lake, Ph.D
Chief Clinical Officer - Sapphire Biotech,
Inc.
Douglas Lake is a tumor immunologist who has been at ASU since
2006. Previously, he was at the University of Arizona Cancer Center
where he studied anti-tumor T cells and tumor-associated peptides
as immunotherapy targets. Currently, he is investigating an enzyme
called QSOX1 that is over-expressed in multiple tumor types. Lake
was the first to show that this enzyme is important in tumor cell
growth, invasion and metastasis. His laboratory is developing
chemical and biological inhibitors of QSOX1 with strong therapeutic
potential. His laboratory also studies Valley Fever
(Coccidioidomycosis). A pressing clinical need is that Valley Fever
lacks an accurate and sensitive diagnostic test while patients are
acutely symptomatic. Lake is developing a test that detects bits
and pieces of the fungus in urine in infected patients. Lake’s
research team also studies chimeric antigen receptor T cells (CAR T
cells). This technology re-directs the immune system toward defined
markers on tumors and unleashes T cells as the most potent killers
against tumors. The vision for CAR T therapies is to re-activate
patients’ immune systems against their tumors, such that they will
have lifelong immunity against their tumor and any mutant tumors
that might arise. In addition, Lake teaches immunology and
microbiology at the undergraduate level and advance cell biology at
the graduate level.
Alim Seit-Nebi, Ph.D
Chief Technology Officer and Co-Founder - Sapphire Biotech,
Inc.
Dr.Seit-Nebi leads the development and implementation of new
antibody and protein-based technologies in diagnostics and
therapeutics. Prior to joining Sapphire, Dr.Seit-Nebi was leading
the development and production of antibodies, recombinant proteins,
biomarkers, and immunoassays for diagnostic and therapeutic
applications for industry and academia, serving at various roles at
GenWay Biotech, Inc. for more than 11 years. Dr.Seit-Nebi is an
expert in a broad array of biochemical, genetic, molecular, and
cellular biology methods with detailed knowledge of signaling
pathways in inflammation, oncogenesis, and cell stress response. He
published 38 articles in prestigious peer-reviewed life-science
journals. He received a doctorate degree in molecular biology from
the Engelhardt Institute of Molecular Biology in Moscow, Russia, in
2002. He then pursued his research interests in immunology and
molecular biology as a postdoctoral fellow at The Scripps Research
Institute.
Maria Moa, Ph.D
VP, Product Development - Sapphire Biotech,
Inc.
Dr. Maria J. Gonzalez Moa is an NCI-trained Medicinal Chemist and
as VP, Product Development, will be responsible for chemical
synthesis, compound design, compound acquisition from outside
sources, and assistance with molecular modeling and NMR. Dr. Moa
holds a Ph.D in Organic/Physical Chemistry from the University of
Vigo, Spain. At the University of Vigo, she was Postdoctoral
Research Associate, Department of Organic and Physical Chemistry.
Dr. Moa was a Postdoctoral Fellow in the Laboratory of Medicinal
Chemistry at the National Cancer Institute, National Institutes of
Health, Frederick, Maryland. Dr. Moa was Postdoctoral Research
Associate at the Center for Innovations in Medicine, the Biodesign
Institute, Arizona State University in Tempe, Arizona. She has
extensive experience working with new tools for diagnostics and was
in charge of the development of novel lateral flow assay tests for
the rapid diagnostic of infectious diseases. Her experience in
Medicinal Chemistry includes design, synthesis, and the
computational study of small molecules with potential anticancer
and antiviral activity. Dr. Moa has published and co-authored over
40 articles in peer-reviewed publications, reviews and book
chapters.
Corporate Governance
General
We believe that good corporate governance is important to ensure
that the Company is managed for the long-term benefit of our
shareholders. This section describes key corporate governance
practices that we have adopted.
Board of Directors Meetings and Attendance
The Company’s Board of Directors has responsibility for
establishing broad corporate policies and reviewing our overall
performance rather than day-to-day operations. The primary
responsibility of the Board is to oversee the management of the
Company and, in doing so, serve the best interests of the Company
and its shareholders. The Board selects, evaluates and provides for
the succession of executive officers and, subject to shareholder
election, directors. It reviews and approves corporate objectives
and strategies and evaluates significant policies and proposed
major commitments of corporate resources. The Board also
participates in decisions that have a potential major economic
impact on the Company. Management keeps the directors informed of
Company activity through regular communication, including written
reports and presentations at Board and committee meetings.
Committees of the Board of Directors
The Company has formal Compensation, Audit and Nominating and
Governance Committees. All other functions of the Board are being
undertaken by the Board of Directors as a whole.
Compensation Committee
The Compensation Committee consists of Timothy Scott, and Robert
Cunningham and has established a charter that requires all members
of the Compensation Committee to be “non-employee directors” for
purposes of Rule 16b-3 of the Exchange Act and satisfy the
requirements of an “outside director” for purposes of Section 16(m)
of the Internal Revenue Code. The Compensation Committee is
responsible for overseeing and, as appropriate, making
recommendations to the Board of Directors regarding the annual
salaries and other compensation of our executive officers, our
general employee compensation and other policies and providing
assistance and recommendations with respect to our compensation
policies and practices. The Compensation Committee is authorized to
carry out these activities and other actions reasonably related to
the Compensation Committee’s purposes or assigned by the Board of
Directors from time to time. The Compensation Committee’s specific
responsibilities are delineated in its charter.
Audit Committee
The Audit Committee consists of Robert Cunningham and Timothy Scott
and has established a charter that requires all members of the
Audit Committee to be independent in accordance with applicable
listing standards. Our securities are quoted on the OTCQB, which
does not have any director independence requirements. Further,
companies with securities only quoted on the OTCQB are not required
to comply with the independence standards set forth in Rule
10A-3(b)(1) of the Exchange Act. Our Board of Directors has
determined that Mr. Robert Cunningham is an “audit committee
financial expert” as defined in Item 407(d) of Regulation S-K.
The Audit Committees responsibilities include: (i) selecting and
evaluating the performance of our independent auditors; (ii)
reviewing the scope of the audit to be conducted by our independent
auditors, as well as the result of their audit, and approving audit
and non-audit services to be provided; (iii) reviewing and
assessing our financial reporting activities and disclosure,
including our earnings press releases and periodic reports, and the
accounting standards and principles followed; (iv) reviewing the
scope, adequacy and effectiveness of our internal control over
financial reporting; (v) reviewing management’s assessment of our
compliance with our disclosure controls and procedures; (vi)
reviewing our public disclosure policies and procedures; g)
reviewing our guidelines and policies regarding risk assessment and
management, our tax strategy and our investment policy; h)
reviewing and approving related-party transactions; and (vii)
reviewing threatened or pending litigation matters and
investigating matters brought to the committees attention that are
within the scope of its duties.
Nominating and Governance Committee
The Nominating and Governance Committee consists of Robert
Cunningham and Timothy Scott and has established a charter that
governs its role with the Company. Timothy Scott has been appointed
as the Chairman of the Nominating and Governance Committee.
The role of the Nominating and Governance Committee is to identify,
qualify and propose new board members for the Company. The
Nominating and Governance Committee shall also submit a slate of
officers including, when applicable. The Nominating and Governance
Committee shall: (i) obtain biographies and effectively screen all
nominations to ensure selection of members of the highest caliber
to serve as selected officers and directors; and (ii) in connection
with the performance of its duties, the Nominating and Governance
Committee shall have unrestricted access to and assistance from the
officers, employees and independent auditors of the Corporation,
and shall be furnished with such resources and support from the
Company as the Nominating and Governance Committee shall deem
necessary. The Nominating and Governance Committee shall have the
authority to employ, at the expense of the Company, such experts
and professionals as the Nominating and Governance Committee shall
deem appropriate from time to time.
Security Holder Communications with our Board of
Directors
The Company provides an informal process for security holders to
send communications to our Board of Directors. Security holders who
wish to contact the Board of Directors or any of its members may do
so by writing to: AXIM Biotechnologies, Inc., 6191 Cornerstone
Court E suite 114 San Diego Ca 92121. Correspondence directed to an
individual board member is referred, unopened, to that member.
Correspondence not directed to a particular board member is
referred, unopened, to the President and CEO.
Conflicts of Interest
Some of officers and all our directors are not obligated to commit
their full time and attention to our business and, accordingly,
they may encounter a conflict of interest in allocating their time
between our operations and those of other businesses. In the course
of their other business activities, they may become aware of
investment and business opportunities which may be appropriate for
presentation to us as well as other entities to which they owe a
fiduciary duty. As a result, they may have conflicts of interest in
determining to which entity a particular business opportunity
should be presented. They may be currently and, in the future, may
become affiliated with entities that are engaged in business
activities similar to those we intend to conduct.
In general, officers and directors of a corporation are required to
present business opportunities to the Company if:
1. The Company could financially undertake the opportunity;
2. The opportunity is within the Company’s line of business;
and
3. It would be unfair to the Company and its shareholders not to
bring the opportunity to the attention of the Company.
Code of Ethics
We have adopted a written code of ethics that obligates our
directors, officers and employees to disclose potential conflicts
of interest and prohibits those persons from engaging in such
transactions without our consent.
Compliance with Section 16(a) of Securities Exchange Act of
1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the registrant’s officers and directors, and persons who
own more than 10% of a registered class of the registrant’s equity
securities, to file reports of ownership and changes in ownership
of equity securities of the Registrant with the Securities and
Exchange Commission. Officers, directors and greater-than-10%
shareholders are required by the Securities and Exchange Commission
regulation to furnish the registrant with copies of all Section
16(a) forms that they file. Based solely upon a review of Forms 3
and 4 and amendments thereto furnished to us during our most recent
fiscal year and Forms 5 and amendments thereto furnished to us with
respect to our most recent fiscal year, to the best of our
knowledge, all executive officers, directors and persons holding
greater than 10% of our issued and outstanding stock have filed the
required reports in a timely manner during fiscal 2021.
Family Relationships
There is no family relationship between any Director, executive or
person nominated or chosen by the Company to become a Director or
executive officer.
Item
11. Executive Compensation
Summary Compensation Table
The following table sets forth the total compensation for services
rendered in all capacities that was earned by each individual who
served (i) as our principal executive officer at any time during
fiscal 2021, and (ii) our two most highly compensated executive
officers other than our principal executive officer who were
serving as executive officers as of December 31, 2021:
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards
|
|
|
Warrant/
Option
Awards
|
|
|
Non-Equity
Incentive
Plan
Compensation
|
|
|
Nonqualified
Deferred
Compensation
Earnings
|
|
|
All Other
Compensation
|
|
|
Total/$
|
|
|
John W. Huemoeller II
|
|
2021
|
|
|
420,000 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
420,000 |
|
|
Director, Chief Executive Officer
|
|
2020
|
|
|
420,000 |
|
|
|
- |
|
|
|
- |
|
|
|
1,260,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,680,000 |
|
|
Catalina Valencia
|
|
2021
|
|
|
187,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
187,500 |
|
|
CEO Sapphire Biotechnologies
|
|
2020
|
|
|
112,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112,500 |
|
|
Robert Malasek
|
|
2021
|
|
|
47,000 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
47,000 |
|
|
Chief Financial Officer, Secretary
|
|
2020
|
|
|
36,000 |
|
|
|
- |
|
|
|
- |
|
|
|
126,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
162,000 |
|
Employment Agreements
John W. Huemoeller II
On January 2, 2019, the Company entered into an executive
employment agreement, at a base salary of $20,000 per month, with
John W. Huemoeller II to serve as its Chief Executive Officer.
Pursuant to the agreement, Mr. Huemoeller’s employment shall at all
times be “at will,” which means that he may resign at any time for
any reason or for no reason, and that the Company may terminate his
employment at any time for any reason or for no reason, in either
case, subject to the applicable provisions of the agreement.. In
further consideration for Mr. Huemoeller’s services and subject to
the approval of the Board, Mr. Huemoeller will be granted an option
to purchase 2,000,000 shares of the Company’s common stock, upon
his hiring (the “Option Shares”). The option will be subject to the
terms and conditions applicable to stock options granted under the
Company’s 2015 Stock Incentive Plan, as amended from time to time
(the “Plan”), and as described in the Plan and the stock option
agreement, which Mr. Huemoeller will be required to sign. 50% of
the Option Shares shall vest on the date of grant and the remaining
50% of the Option Shares shall vest on the 12- month anniversary of
the grant date, subject to Mr. Huemoeller’s continued employment by
the Company. The exercise price per share will be equal to the fair
market value per share on the date of grant, as determined by the
last closing price of the Company’s common stock the day prior to
grant. Beginning in October 2019, the Board of Directors decided to
increase Mr. Huemoeller’s base salary to $35,000 per month.
Robert Malasek
On or about June 29, 2016, Robert Malasek was appointed as the
Company’s Chief Financial Officer and Secretary. In April, 2017 the
Company entered in employment agreement with Robert Malasek its,
Chief Financial Officer and Secretary. The agreement does not have
a set term and may be terminated by any time by the Company or Mr.
Robert Malasek with proper notice. Under the agreement Mr. Malasek
receives a monthly base compensation of $1,000 and effective April
1, 2022, Mr. Malasek’s base compensation was increased to $7,500
per month.
Outstanding Equity Awards at Fiscal Year-End
2021
|
Name
|
|
Number of Securities Underlying Unexercised
Options
(Exercisable)
|
|
|
Number of Securities Underlying Unexercised
Options
(Unexercisable)
|
|
|
Equity Incentive Plan Awards: Number of Securities
Underlying Unexercised Unearned
Options
|
|
|
Option
Exercise
Price
|
|
|
Option
Expiration
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John W. Huemoeller II
|
|
|
3,000,000 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
0.42 |
|
|
12/10/2030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Malasek
|
|
|
300,000 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
0.42 |
|
|
12/10/2030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors Compensation
The following table sets forth information for the year ended
December 31, 2021, regarding the compensation awarded to, earned
by, or paid to our non-employee directors who served on our board
of directors during 2021.
Director Compensation for Fiscal Year 2021
|
Name of Director
|
|
Fiscal
Year
|
|
Fees earned or
paid in cash
($)
|
|
|
Option
Awards
($)
|
|
|
Stock
Grants
($)
|
|
|
All other compensation
($)
|
|
|
Total
($)
|
|
|
Timothy R. Scott, PhD
|
|
2021
|
|
|
20,000 |
|
|
|
7,595 |
|
|
|
— |
|
|
|
— |
|
|
|
27,595 |
|
|
Robert Cunningham
|
|
2021
|
|
|
20,000 |
|
|
|
7,595 |
|
|
|
— |
|
|
|
— |
|
|
|
27,595 |
|
|
Peter O’ Rourke
|
|
2021
|
|
|
20,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20,000 |
|
|
Mauricio J Gatto-Bellora(1)
|
|
2021
|
|
|
20,000 |
|
|
|
7,595 |
|
|
|
— |
|
|
|
— |
|
|
|
27,595 |
|
__________________
|
|
(1)
|
Mr. Gatto-Bellora resigned from his role on the Company’s Board of
Directors on January 4, 2022. Mr. Blake Schroeder was appointed as
a director of the Company on January 6, 2022 to fill the vacancy
created by Mr. Bellora’s resignation.
|
For the year ended December 31, 2021, our directors were each
entitled to receive an annual $20,000 cash stipend as compensation
for their services as directors of the Company. Additionally, all
directors other than Mr. O’Rourke received $7,795 worth of stock
options as additional consideration for services rendered.
Item
12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
The following table sets forth certain information regarding our
common stock beneficially owned as of December 31, 2021:
|
|
(i)
|
each stockholder known by us to be the beneficial owner of five
(5%) percent or more of our outstanding common stock;
|
|
|
(ii)
|
each of our named executive officers and directors
|
This information as to beneficial ownership was furnished to the
Company by or on behalf of each person named. As at April 12, 2022,
there were 138,099,981 shares of our common stock issued and
outstanding. Beneficial ownership is determined in accordance with
the rules of the SEC, which generally attribute beneficial
ownership of securities to persons who possess sole or shared
voting or investment power with respect to those securities and for
such persons includes shares of our common stock issuable to such
persons pursuant to the exercise of stock options, warrants or
other securities that are exercisable or convertible into shares of
our common stock within 60 days of April 12, 2022.
|
|
|
Name and Address of
Beneficial Owner
|
|
Amount and Nature
of Beneficial Ownership
|
|
|
Percentage
of Class
|
|
|
Named Executive Officers
and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
John W. Huemoeller II(1)(4)
|
|
|
9,000,000 |
|
|
|
6.51 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Malasek(1)
|
|
|
350,000 |
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy R. Scott, PhD(1)
|
|
|
333,333 |
|
|
|
*
|
|
|
|
|
Robert Cunningham(1)
|
|
|
333,333 |
|
|
|
*
|
|
|
|
|
Peter O’Rourke (1)
|
|
|
250,000 |
|
|
|
*
|
|
|
|
|
Blake N. Schroeder(1)
|
|
|
0 |
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Directors and Officers as a Group
|
|
|
6.51
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Marijuana, Inc.(2)
|
|
|
22,669,125 |
|
|
|
16.41 |
% |
|
|
|
Catalina Valencia
|
|
|
19,800,000 |
|
|
|
14.34 |
% |
|
|
|
Glycodots, LLC
|
|
|
19,800,000 |
|
|
|
14.34 |
% |
|
|
|
Juniper & Ivy Corporation(3)
|
|
|
500,000 |
|
|
|
*
|
|
______________
|
|
* Less than 1%
|
|
|
|
|
|
|
(1)
|
The address is: 6191 Cornerstone Court, E. Suite 114, San Diego, CA
92121.
|
|
|
|
|
|
|
(2)
|
The address is: 13831 Danielson, Poway, CA 92064.
|
|
|
|
|
|
|
(3)
|
Juniper & Ivy Corporation owns 500,000 shares of our Series C
Preferred Stock. Each share of our Series C Preferred Stock in
convertible into one (1) share of our common stock. The holder of
our Series C Preferred Stock has voting control of the Company.
|
|
|
|
|
|
|
(4)
|
Does not include 500,000 shares of Series C Preferred Stock held by
Juniper & Ivy Corporation of which Mr. Huemoeller II is the
sole shareholder.
|
Item
13. Certain Relationships and Related Transactions, and Director
Independence
On May 6, 2020 (the “Effective Date”), AXIM Biotechnologies, Inc.,
a Nevada corporation (the “Company”), entered into an Agreement
(the “Separation Agreement”). Pursuant to the Separation Agreement,
the Company transferred 100% of its interest in CanCo and CanChew
to an entity designated by Dr. Anastassov. In consideration for the
transfers set forth above, any and all indebtedness owed by the
Company to CanChew, totaling approximately $2.61 million, was
satisfied and paid in its entirety.
Board of Directors Independence
The Company considers Robert Cunningham and Timothy Scott to be
“independent” within the meaning of definitions established by the
Securities and Exchange Commission.
Item
14. Principal Accountant Fees and Services
Audit Fees
RBSM, LLP has served as our independent public accounting firm
since 2014. RBSM, LLP billed us $137,171 and $116,703 in audit fees
during the years ended December 31, 2021 and 2020,
respectively.
Audit-Related Fees
We did not pay any fees to any of our primary auditors, for
assurance and related services that are not reported under Audit
Fees above, during our fiscal years ended December 31, 2021 and
2020.
Tax and All Other Fees
We did not pay any fees to any of our primary auditors for tax
compliance, tax advice, tax planning or other work during our
fiscal years ended December 31, 2021 and 2020.
Pre-Approval Policies and Procedures
With respect to the audit of our financial statements as of
December 31, 2021 and 2020, and for the years then ended, none of
the hours expended on any of our primary auditor’s engagement to
audit those financial statements were attributed to work by persons
other than our primary auditor’s full- time, permanent
employees.
Item
15. Exhibits, Financial Statement Schedules
Please see the below Exhibit Index and the Index to Financial
Statements and related notes to financials which follows the
signature page to this annual report on Form 10-K and which is
incorporated by reference herein.
Exhibit Index
|
Exhibits
|
|
Exhibit #
|
|
Incorporated by Reference
(Form Type)
|
|
|
Filing Date
|
|
Filed
with
This
Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Articles of Incorporation, as filed with the Nevada Secretary of
State on November 18, 2010.
|
|
|
3.1
|
|
|
10-Q
|
|
|
11/14/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate of Amendment, as filed with the Nevada Secretary of
State on July 24, 2014.
|
|
|
3.2
|
|
|
10-Q
|
|
|
11/14/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended and Restated (As of August 17, 2016) Bylaws of AXIM
Biotechnologies, Inc.
|
|
|
3.3
|
|
|
10-Q
|
|
|
8/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate of Designation of Series B Preferred Stock.
|
|
|
3.4
|
|
|
10-Q
|
|
|
8/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate of Designation of Series C Preferred Stock.
|
|
|
3.5
|
|
|
10-Q
|
|
|
8/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description of Securities
|
|
|
4.1
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Letter of Intent (“Terms Sheet”) dated September 3, 2018, by and
between Impression Healthcare Limited and AXIM Biotechnologies,
Inc.
|
|
|
10.1
|
|
|
10-K (A/1)
|
|
|
10/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exclusivity Agreement dated September 3, 2018, by and between
Impression Healthcare Limited and AXIM Biotechnologies,
Inc.
|
|
|
10.2
|
|
|
10-K (A/1)
|
|
|
10/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment #1 to Exclusivity Agreement dated December 11, 2018, by
and between Impression Healthcare Limited and AXIM Biotechnologies,
Inc.
|
|
|
10.3
|
|
|
10-K (A/1)
|
|
|
10/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply Agreement dated May 31, 2019, by and between Impression
Healthcare Limited and AXIM Biotechnologies, Inc.
|
|
|
10.4
|
|
|
10-K (A/1)
|
|
|
10/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 1, 2019, License Agreement with CanChew Biotechnologies,
LLC.
|
|
|
10.5
|
|
|
10-K (A/1)
|
|
|
05/20/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Purchase Agreement dated May 14, 2021, by and between AXIM
Biotechnologies, Inc and Cross & Company
|
|
|
10.6
|
|
|
8-K
|
|
|
05/14/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Binding Term Sheet Agreement dated August
3, 2021, by and between AXIM Biotechnologies, Inc. and Advanced
Tear Diagnostics, LLC.
|
|
|
10.7
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Purchase Agreement dated August 26,
2021, by and between AXIM Biotechnologies, Inc. and Advanced Tear
Diagnostics, LLC.
|
|
|
10.8
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of 1.5% Short Term Promissory Notes, dated February 10,
2022.
|
|
|
10.9
|
|
|
8-K
|
|
|
02/16/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Form of 3% Short Term Promissory Notes, dated February 10,
2022.
|
|
|
10.10
|
|
|
8-K
|
|
|
02/16/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6% Convertible Redeemable Note dated September 29, 2021, made by
and between AXIM Biotechnologies, Inc. and GS Capital Partners,
LLC, as amended.
|
|
|
10.11
|
|
|
8-K
|
|
|
02/16/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination Agreement dated March 3,
2022, by and between AXIM Biotechnologies, Inc. and Empowered
Diagnostics, LLC
|
|
|
10.12
|
|
|
|
|
|
|
|
X
|
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ John W. Huemoeller II
|
|
President and Director (Principal Executive Officer)
|
|
Date April 15, 2022
|
|
John W. Huemoeller II
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Robert Malasek
|
|
Chief Financial Officer (Principal Financial Officer)
|
|
Date April 15, 2022
|
|
Robert Malasek
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Timothy R. Scott, PhD
|
|
Director
|
|
Date April 15, 2022
|
|
Timothy R. Scott, PhD
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Robert Cunningham
|
|
Director
|
|
Date April 15, 2022
|
|
Robert Cunningham
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Peter O’Rourke
|
|
Director
|
|
Date April 15, 2022
|
|
Peter O’ Rourke
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Blake N. Schroeder
|
|
Director
|
|
Date April 15, 2022
|
|
Blake N. Schroeder
|
|
|
|
|
AXIM
BIOTECHNOLOGIES, INC.
Index to Financial Statements
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of
Axim Biotechnologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
Axim Biotechnologies, Inc. (the “Company”), as of December 31, 2021
and 2020, and the related consolidated statements of operations,
stockholders’ deficit and cash flows for each of the two years in
the period ended December 31, 2021 and the related notes
(collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of
the Company as of December 31, 2021 and 2020, and the results of
its operations and its cash flows for each of the two years in the
period ended December 31, 2021, in conformity with accounting
principles generally accepted in the United States of America.
The Company’s Ability to Continue as a Going
Concern
The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. As
discussed in Note 5 to the accompanying consolidated financial
statements, the Company has suffered recurring losses from
operations, generated negative cash flows from operating
activities, has an accumulated deficit that raise substantial doubt
about Company’s ability to continue as a going concern.
Management’s evaluation of the events and conditions and
management’s plans in regarding these matters are also described in
Note 5. The consolidated financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an
opinion on these consolidated 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. 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 the Company’s 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.
Critical Audit Matters
The critical audit matters communicated below are matters
arising from the current period audit of the carve-out financial
statements that were communicated or required to be communicated to
the audit committee and that (i) relate to accounts or disclosures
that are material to the carve-out financial statements and (ii)
involved our especially challenging, subjective, or complex
judgments. The communication of critical audit matters does not
alter in any way our opinion on the carve-out financial statements,
taken as a whole, and we are not, by communicating the critical
audit matters below, providing separate opinions on the critical
audit matters or on the accounts or disclosures to which they
relate.
Valuation of intangible assets
acquired
Description of the Matter
As described in Note 3 to the consolidated financial statements,
the Company acquired patents and 510(K) Licenses from Tear
Diagnostics, LLC, (collectively, the “Asset Acquisition”) for a
total amount of $4,520,000 in 2021. The acquisition was accounted
as an asset acquisition. Accordingly, the purchase price was
allocated to the assets acquired based on their fair values.
Auditing the Company’s accounting for its acquisitions was complex
due to the significant estimation uncertainty in the Company’s
determination of the fair value of identified intangible assets of
$4,520,000, which consists of patents and 510(K) licenses. The
significant estimation uncertainty was primarily due to the
sensitivity of the respective fair values to underlying assumptions
about the future cash flows of the acquired assets. The significant
assumptions used to estimate the value of the intangible assets
included certain assumptions that form the basis of the forecasted
results, including revenue growth rates and expected net operating
income margins. These significant assumptions are forward looking
and could be affected by future economic and market conditions.
How We Addressed the Matter in Our Audit
For the Company’s acquisition, we read the purchase agreement,
evaluated the significant assumptions and methods used in
developing the fair value estimates, and tested the recognition of
(1) the identifiable intangible assets acquired at fair value.
To test the estimated fair value of the intangible assets, we
performed audit procedures that included, among others, evaluating
the Company’s selection of the valuation methodology, evaluating
the significant assumptions used by the Company, and evaluating the
completeness and accuracy of the underlying data supporting the
significant assumptions and estimates.
This includes comparing the significant assumptions to current
market and economic trends, to the assumptions used to value
similar assets in other acquisitions, and to other guidelines used
by companies within the same industry. We involved our valuation
professionals to assist in our evaluation of the methodology used
by the Company and significant assumptions included in the fair
value estimates.
/s/ RBSM, LLP
We
have served as the Company’s auditor since 2014
PCAOB ID 587
New York, New York
April 15, 2022
AXIM
BIOTECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
|
|
|
As of
December 31,
2021
|
|
|
As of
December 31,
2020
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash
|
|
$ |
452,963 |
|
|
$ |
457,181 |
|
|
Prepaid expenses
|
|
|
163,561 |
|
|
|
255,923 |
|
|
Other current assets
|
|
|
20,089 |
|
|
|
|
|
|
Total current assets
|
|
|
636,613 |
|
|
|
713,104 |
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation
|
|
|
116,810 |
|
|
|
104,094 |
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
|
Notes receivable- related party
|
|
|
104,268 |
|
|
|
103,242 |
|
|
Goodwill
|
|
|
- |
|
|
|
2,458,233 |
|
|
Research in progress
|
|
|
- |
|
|
|
7,800,000 |
|
|
Intangible asset, net
|
|
|
4,383,873 |
|
|
|
- |
|
|
Security deposit
|
|
|
5,000 |
|
|
|
5,000 |
|
|
Operating lease right-of-use asset
|
|
|
76,871 |
|
|
|
130,722 |
|
|
Total other assets
|
|
|
4,570,012 |
|
|
|
10,497,197 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$ |
5,323,435 |
|
|
$ |
11,314,395 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$ |
909,458 |
|
|
$ |
1,073,142 |
|
|
Lease liability obligations (see Note 16)
|
|
|
56,871 |
|
|
|
53,851 |
|
|
Due to shareholder
|
|
|
180 |
|
|
|
180 |
|
|
Due to first insurance funding
|
|
|
32,873 |
|
|
|
25,369 |
|
|
Promissory note (including accrued interest of $40,475 and $19,507,
respectively)(see note 8)
|
|
|
454,693 |
|
|
|
343,725 |
|
|
Convertible note payable (including accrued interest of $16,919 and
$0, respectively) (see note 12)
|
|
|
1,126,919 |
|
|
|
- |
|
|
Total current liabilities
|
|
|
2,580,994 |
|
|
|
1,496,267 |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
Deferred tax liability
|
|
|
- |
|
|
|
2,340,000 |
|
|
Convertible note payable (including accrued interest of $192,765
and $236,148, respectively) net of unamortized debt discount of
$605,640 and $843,673, respectively(see note 12)
|
|
|
761,604 |
|
|
|
1,676,788 |
|
|
Convertible note payable - related party (including accrued
interest of $299,037 and $158,648, respectively)
|
|
|
4,299,037 |
|
|
|
4,158,648 |
|
|
Lease liability obligations (see Note 16)
|
|
|
20,000 |
|
|
|
76,871 |
|
|
Total long-term liabilities
|
|
|
5,080,641 |
|
|
|
8,252,307 |
|
|
TOTAL LIABILITIES
|
|
|
7,661,635 |
|
|
|
9,748,574 |
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 5,000,000 shares
authorized;
|
|
|
|
|
|
|
|
|
|
Series B Convertible Preferred Stock, $0.0001 par value 500,000
shares designated, 500,000 and 500,000 shares issued, 0 and 0
outstanding, respectively
|
|
|
- |
|
|
|
- |
|
|
Series C Convertible Preferred Stock, $0.0001 par value 500,000
shares designated, 500,000 and 500,000 shares issued and
outstanding, respectively
|
|
|
50 |
|
|
|
50 |
|
|
Common stock, $0.0001 par value, 300,000,000 shares authorized,
138,099,981 and 125,327,579 shares issued and outstanding,
respectively
|
|
|
13,811 |
|
|
|
12,533 |
|
|
Additional paid in capital
|
|
|
51,000,166 |
|
|
|
43,201,186 |
|
|
Common stock to be issued
|
|
|
4,530,000 |
|
|
|
201,974 |
|
|
Accumulated deficit
|
|
|
(57,882,227 |
) |
|
|
(41,849,922 |
) |
|
TOTAL STOCKHOLDERS' DEFICIT
|
|
|
(2,338,200 |
) |
|
|
1,565,821 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$ |
5,323,435 |
|
|
$ |
11,314,395 |
|
The accompanying notes are an integral part of these
consolidated financial statements
AXIM
BIOTECHNOLOGIES, INC.