What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-03-11 compared with 2024-09-06 · 195 added, 229 removed, 2 unchanged (100% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

included in this Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of

Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange

Forward-looking statements are not statements of historical facts, but rather reflect our current expectations concerning

future events and results.

We generally use the words “believes,” “expects,” “intends,” “plans,”

“anticipates,” “likely,” “will” and similar expressions to identify forward-looking statements.

forward-looking statements, including those concerning our expectations, involve risks, uncertainties and other factors, some of which

are beyond our control, which may cause our actual results, performance or achievements, or industry results, to be materially different

from any future results, performance or achievements expressed or implied by such forward-looking statements.

These risks, uncertainties

and factors include, but are not limited to, those factors set forth in our Annual Report on Form 10-K for the fiscal year ended October

Except as required by applicable law, including

the securities laws of the United States, we undertake no obligation to publicly update or revise any forward-looking statements, whether

as a result of new information, future events or otherwise.

You are cautioned not to unduly rely on such forward-looking statements when

evaluating the information presented in this Report.

discuss the description of our business in the Notes to our Condensed Consolidated Financial Statements.

OF OPERATIONS

months ended July 31, 2024 compared with three months ended July 31, 2023

had no revenue during the three months ended July 31, 2024 and 2023.

discussed in Note 1 to our condensed consolidated financial statements, as part of our legacy operations, the Company remains engaged

in limited patent licensing activities which we do not expect to be a significant part of our ongoing operations or revenue, nor do we

expect these activities to require material financial resources or attention of senior management.

have not generated any revenue to date from our therapeutics or vaccine programs.

In addition, while we pursue our therapeutics and vaccine

programs, we may also make investments in and form new companies to develop additional emerging technologies.

We do not expect to begin

generating revenue with respect to any of our current therapy or vaccine programs in the near term.

We intend to achieve a profitable

outcome by eventually licensing our technologies to large pharmaceutical companies that have the resources and infrastructure in place

to manufacture, market and sell our technologies as therapeutics or vaccines.

The eventual licensing of any of our technologies may take

several years, if it is to occur at all, and may depend on positive results from human clinical trials.

Royalties, Contingent Legal Fees, Litigation and Licensing Expenses

had no inventor royalties, contingent legal fees, litigation and licensing expenses during the three months ended July 31, 2024 and 2023.

and Development Expenses

and development expenses are related to the development of our cancer therapeutics and vaccine programs and the expenses incurred in

the three months ended July 31, 2024 consisted of approximately $666,000 and $1,259,000 for CAR-T therapeutics and cancer vaccines, respectively.

and development expenses increased by approximately $837,000 to approximately $1,925,000 in the three months ended July 31, 2024, from

approximately $1,088,000 in the three months ended July 31, 2023.

The increase in research and development expenses was primarily due

to an increase in outside research and development expenses related to our breast cancer vaccine program of approximately $694,000 and

an increase in outside research and development expenses related to our CAR-T therapeutics program of approximately $235,000, offset

by a decrease in outside research and development expenses related to our ovarian cancer vaccine program of approximately $99,000.

and Administrative Expenses

and administrative expenses decreased by approximately $89,000 to approximately $1,667,000 in the three months ended July 31, 2024, from

approximately $1,756,000 in the three months ended July 31, 2023.

The decrease in general and administrative expenses was primarily due

to a decrease in director stock option compensation expense of approximately $97,000 and a decrease in director fees of approximately

$53,000, offset by an increase in employee stock option compensation expense of approximately $60,000.

income decreased by approximately $19,000 to approximately $277,000 in the three months ended July 31, 2024, from approximately $296,000

in the three months ended July 31, 2023, due to the decreased average dollar amount held in short-term investments, offset by increased

interest rates.

Loss Attributable to Noncontrolling Interest

net loss attributable to noncontrolling interest, representing Wistar’s ownership interest in Certainty’s net loss, increased

by approximately $1,000 to approximately $38,000 in the three months ended July 31, 2024, from approximately $37,000 in the three months

ended July 31, 2023, as Certainty’s net loss increased.

months ended July 31, 2024 compared with nine months ended July 31, 2023

had no revenue during the nine months ended July 31, 2024.

For the nine months ended July 31, 2023, we recorded revenue of approximately

$210,000 from one license agreement.

The license agreement provided for a one-time, non-recurring, lump sum payment in exchange for a

non-exclusive retroactive and future license, and covenant not to sue.

Pursuant to the terms of the agreement, we have no further obligations

with respect to the granted intellectual property rights, including no obligation to maintain or upgrade the technology, or provide future

support or services.

Accordingly, the performance obligations from this license agreement were satisfied and 100% of the revenue was

recognized upon execution of the license agreement.

discussed in Note 1 to our condensed consolidated financial statements, as part of our legacy operations, the Company remains engaged

in limited patent licensing activities which we do not expect to be a significant part of our ongoing operations or revenue, nor do we

expect these activities to require material financial resources or attention of senior management.

have not generated any revenue to date from our therapeutics or vaccine programs.

In addition, while we pursue our therapeutics and vaccine

programs, we may also make investments in and form new companies to develop additional emerging technologies.

We do not expect to begin

generating revenue with respect to any of our current therapy or vaccine programs in the near term.

We intend to achieve a profitable

outcome by eventually licensing our technologies to large pharmaceutical companies that have the resources and infrastructure in place

to manufacture, market and sell our technologies as therapeutics or vaccines.

The eventual licensing of any of our technologies may take

several years, if it is to occur at all, and may depend on positive results from human clinical trials.

Royalties, Contingent Legal Fees, Litigation and Licensing Expenses

had no inventor royalties, contingent legal fees, litigation and licensing expenses during the nine months ended July 31, 2024.

royalties, contingent legal fees, litigation and licensing expenses for the nine months ended July 31, 2023 were approximately $161,000.

Inventor royalties and contingent legal fees are expensed in the period that the related revenues are recognized.

Litigation and licensing

expenses related to patent assertion, other than contingent legal fees, are expensed in the period incurred.

and Development Expenses

and development expenses are related to the development of our cancer therapeutics and vaccine programs and the expenses incurred in

the nine months ended July 31, 2024 consisted of approximately $2,093,000 and $2,827,000 for CAR-T therapeutics and cancer vaccines,

respectively.

and development expenses increased by approximately $1,766,000 to approximately $4,920,000 in the nine months ended July 31, 2024, from

approximately $3,154,000 in the nine months ended July 31, 2023.

The increase in research and development expenses was primarily due

to an increase in outside research and development expenses related to our breast cancer vaccine program of approximately $1,088,000,

an increase in outside research and development expenses related to our CAR-T therapeutics program of approximately $642,000, an increase

in employee compensation and related costs, other than stock option compensation expense, of approximately $120,000, an increase in consulting

fees of approximately $72,000, an increase in employee stock option compensation of approximately $57,000, and an increase in outside

research and development expenses related to our new cancer vaccine discovery program of approximately $56,000, offset by a decrease

in outside research and development expenses related to our ovarian cancer vaccine program of approximately $195,000 and a decrease in

consultant stock option expense of approximately $103,000.

and Administrative Expenses

and administrative expenses increased by approximately $893,000 to approximately $5,748,000 in the nine months ended July 31, 2024, from

approximately $4,855,000 in the nine months ended July 31, 2023.

The increase in general and administrative expenses was primarily due

to an increase in investor and public relations expense of approximately $611,000, an increase in employee stock option compensation

expense of approximately $128,000, an increase in consulting fees of approximately $48,000, and increase in legal fees of approximately

$34,000, an increase in consultant stock option expense of approximately $29,000, and an increase in patent-related expenses of approximately

income increased by approximately $132,000 to approximately $883,000 in the nine months ended July 31, 2024, from approximately $751,000

in the nine months ended July 31, 2023, due to increased interest rates and the increased average dollar amount held in short-term investments.

Loss Attributable to Noncontrolling Interest

net loss attributable to noncontrolling interest, representing Wistar’s ownership interest in Certainty’s net loss, increased

by approximately $26,000 to approximately $114,000 in the nine months ended July 31, 2024, from approximately $88,000 in the nine months

ended July 31, 2023, as Certainty’s net loss increased.

AND CAPITAL RESOURCES

primary sources of liquidity are cash, cash equivalents and short-term investments.

on currently available information as of September 6, 2024, we believe that our existing cash, cash equivalents, short-term investments

and expected cash flows will be sufficient to fund our activities for at least the next twelve months.

The Company has approximately $20,745,000 of cash, cash equivalents, and

short-term investments at July 31, 2024 compared to approximately $23,844,000 at October 31, 2023 which is a reduction of approximately

$3,099,000 during the nine months ended July 31, 2024.

Therefore, the Company believes that it has sufficient cash, cash equivalents,

and short-term investments to operate its business, as currently contemplated, for significantly longer than 12 months from the date of

We have implemented a business

model that conserves funds by collaborating with third parties to develop our technologies.

During the nine months ended July 31, 2024, we raised approximately $2,984,000, net of expenses, through

an at-the-market equity offering of 785,290 shares of common stock, under which offering we may issue up to $100 million of common stock.

Under our at-the-market equity program, which is currently effective and may remain available for us to use in the future, as of July

31, 2024, we may sell an additional approximately $97 million of common stock.

the nine months ended July 31, 2024, cash used in operating activities was approximately $6,408,000.

Cash provided by investing activities

was approximately $3,409,000, resulting from the maturities of short-term investments of approximately $50,716,000, offset by purchases

of short-term investments totaling approximately $47,307,000.

Cash provided by financing activities was approximately $3,309,000, resulting

from the sale of 785,290 shares of common stock in an at-the-market equity offering of approximately $2,984,000, net of expenses, proceeds

from stock option exercises of approximately $318,000, and proceeds from the sale of common stock pursuant to an employee stock purchase

plan of approximately $7,000.

As a result, our cash, cash equivalents, and short-term investments at July 31, 2024 decreased approximately

$3,099,000 to approximately $20,745,000 from approximately $23,844,000 at the end of fiscal year 2023.

ACCOUNTING POLICIES

Company’s condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted

in the United States of America.

In preparing these financial statements, we make assumptions, judgments and estimates that can have

a significant impact on amounts reported in our condensed consolidated financial statements.

We base our assumptions, judgments and estimates

on historical experience and various other factors that we believe to be reasonable under the circumstances.

Actual results could differ

materially from these estimates under different assumptions or conditions.

On a regular basis, we evaluate our assumptions, judgments

and estimates and make changes accordingly.

believe that, of the significant accounting policies discussed in Note 2 to our consolidated financial statements in our Annual Report

on Form 10-K for the fiscal year ended October 31, 2023, the following accounting policies require our most difficult, subjective or

complex judgments:

Compensation, and

and Development Expenses.

revenue has been derived solely from technology licensing and the sale of patented technologies.

Revenue is recognized upon transfer

of control of intellectual property rights and satisfaction of other contractual performance obligations to licensees in an amount that

reflects the consideration we expect to receive.

revenue recognition policy requires us to make certain judgments and estimates in connection with the accounting for revenue.

may include determining the existence of a contract and identifying each party’s rights and obligations to transfer goods and services,

identifying the performance obligations in the contract, determining the transaction price and allocating the transaction price to separate

performance obligations, estimating the timing of satisfaction of performance obligations, determining whether a promise to grant a license

is distinct from other promised goods or services and evaluating whether a license transfers to a customer at a point in time or over

revenue arrangements provide for the payment, within 30 days of execution of the agreement, of contractually determined, one-time, paid-up

license fees in settlement of litigation and in consideration for the grant of certain intellectual property rights for patented technologies

owned or controlled by the Company.

Discussion and Analysis of Financial Condition and Results of Operations.

Information included in this Quarterly

Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities

Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Forward-looking

statements are not statements of historical facts, but rather reflect our current expectations concerning future events and results.

generally use the words “believes,” “expects,” “intends,” “plans,” “anticipates,”

“likely,” “will” and similar expressions to identify forward-looking statements.

Such forward-looking statements,

including those concerning our expectations, involve risks, uncertainties and other factors, some of which are beyond our control, which

may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance

or achievements expressed or implied by such forward-looking statements.

These risks, uncertainties and factors include, but are not limited

to, those factors set forth in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024.

Except as required by applicable law, including the securities laws of the United States,

we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future

events or otherwise.

You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented

in this Report.

We discuss the description of

our business in the Notes to our Condensed Consolidated Financial Statements.

RESULTS OF OPERATIONS

Three months ended January 31, 2025 compared

with three months ended January 31, 2024

We had no revenue during the three-month

periods ended January 31, 2025 and 2024.

We have not generated any revenue

to date from our therapeutics or vaccine programs.

In addition, while we pursue our therapeutics and vaccine programs, we may also make

investments in and form new companies to develop additional emerging technologies.

We do not expect to begin generating revenue with respect

to any of our current therapy or vaccine programs in the near term.

We hope to achieve a profitable outcome by eventually licensing our

technologies to large pharmaceutical companies that have the resources and infrastructure in place to manufacture, market and sell our

technologies as therapeutics or vaccines.

The eventual licensing of any of our technologies may take several years, if it is to occur

at all, and may depend on positive results from human clinical trials.

Research and Development

During the three months ended

January 31, 2025, research and development expenses related to the development of our cancer vaccines and CAR-T therapeutics consisted

of approximately $975,000 and $577,000, respectively.

During the three months ended January 31, 2024 research and development expenses

related to the development of our cancer vaccines and CAR-T therapeutics consisted of approximately $720,000 and $629,000, respectively.

Research and development expenses

increased by approximately $203,000 to approximately $1,552,000 in the three months ended January 31, 2025, from approximately $1,349,000

in the three months ended January 31, 2024.

The increase in research and development expenses was primarily due to an increase in outside

research and development expenses related to our breast cancer vaccine program of approximately $88,000, an increase in license fees related

to our ovarian cancer CAR-T therapeutic of approximately $80,000, an increase in employee compensation and related costs, other than stock-based

compensation expense, of approximately $69,000, and an increase in outside research and development expenses related to our new vaccine

discovery program of approximately $56,000, offset by a decrease in employee stock-based compensation expense of approximately $59,000,

and a decrease in consultant stock-based compensation expense of approximately $33,000.

General and Administrative

General and administrative expenses

decreased by approximately $426,000 to approximately $1,834,000 in the three months ended January 31, 2025, from approximately $2,260,000

in the three months ended January 31, 2024.

The decrease in general and administrative expenses was primarily due to a decrease in investor

and public relations expense of approximately $291,000, a decrease in employee compensation and related costs, other than stock-based

compensation expense, of approximately $70,000, a decrease in director stock-based compensation of approximately $67,000, and a decrease

in legal and other professional fees of approximately $57,000, offset by an increase in employee stock-based compensation expense of approximately

Interest Income

Interest income decreased by approximately

$146,000 to approximately $173,000 in the three months ended January 31, 2025, from approximately $319,000 in the three months ended January

31, 2024, primarily due to a decrease in the amount of short-term investments held and a decrease in interest rates.

Net Loss Attributable to

Noncontrolling Interest

The net loss attributable to noncontrolling

interest, representing Wistar’s ownership interest in Certainty’s net loss, decreased by approximately $6,000 to approximately

$29,000 in the three months ended January 31, 2025 from approximately $35,000 in the three months ended January 31, 2024, as Certainty’s

net loss decreased.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity

are cash, cash equivalents and short-term investments.

Based on currently available information as of March 11, 2025, we believe

that our existing cash, cash equivalents and short-term investments will be sufficient to fund our activities for at least the next twelve

The Company had approximately $18,686,000 of total current assets at January 31, 2025 compared to approximately $21,362,000 at

October 31, 2024 which is a reduction of approximately $2,676,000 for the three months ended January 31, 2025.

Therefore, the Company

believes that it has sufficient cash, cash equivalents and short-term investments to operate its business, as currently contemplated,

for significantly longer than 12 months from the date of this Report.

We have implemented a business model that conserves funds by collaborating

with third parties to develop our technologies.

During the three months ended January 31, 2025, we did not issue any shares under our

at-the-market equity offering.

Under our at-the-market equity program, which is currently effective and may remain available for us to

use in the future, as of January 31, 2025, we may sell approximately $97 million of common stock.

During the three months ended

January 31, 2025, cash used in operating activities was approximately $2,904,000.

Cash provided by investing activities was approximately

$2,703,000, resulting from the maturities of short-term investments of approximately $15,700,000, offset by purchases of short-term investments

totaling approximately $12,997,000.

Cash used in financing activities was approximately $17,000, due to expenses related to maintaining

our at-the-market equity offering program.

As a result, our cash, cash equivalents, and short-term investments at January 31, 2025 decreased

approximately $2,669,000 to approximately $17,255,000 from approximately $19,924,000 at the end of fiscal year 2024.

CRITICAL ACCOUNTING POLICIES

The Company’s condensed

consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America.

In preparing these financial statements, we make assumptions, judgments and estimates that can have a significant impact on amounts reported

in our condensed consolidated financial statements.

We base our assumptions, judgments and estimates on historical experience and various

other factors that we believe to be reasonable under the circumstances.

Actual results could differ materially from these estimates under

different assumptions or conditions.

On a regular basis, we evaluate our assumptions, judgments and estimates and make changes accordingly.

We believe that, of the significant

accounting policies discussed in Note 2 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year

ended October 31, 2024, the following accounting policies require our most difficult, subjective or complex judgments:

Revenue Recognition,

Stock-Based Compensation, and

Research and Development Expenses.

Revenue Recognition

Our revenue has been derived solely

from technology licensing and the sale of patented technologies.

Revenue is recognized upon transfer of control of intellectual property

rights and satisfaction of other contractual performance obligations to licensees in an amount that reflects the consideration we expect

Our revenue recognition policy

requires us to make certain judgments and estimates in connection with the accounting for revenue.

Such areas may include determining

the existence of a contract and identifying each party’s rights and obligations to transfer goods and services, identifying the

performance obligations in the contract, determining the transaction price and allocating the transaction price to separate performance

obligations, estimating the timing of satisfaction of performance obligations, determining whether a promise to grant a license is distinct

from other promised goods or services and evaluating whether a license transfers to a customer at a point in time or over time.

Our revenue arrangements provide

for the payment, within 30 days of execution of the agreement, of contractually determined, one-time, paid-up license fees in settlement

of litigation and in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled

by the Company.

These arrangements typically include some combination of the following:

(i) the grant of a non-exclusive,

retroactive and future license to manufacture and/or sell products covered by patented technologies owned or controlled by the Company,

(ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation.

In such instances, the intellectual property rights granted have been perpetual in nature, extending until the expiration of the related

Pursuant to the terms of these agreements, we have no further obligations with respect to the granted intellectual property

rights, including no obligation to maintain or upgrade the technology, or provide future support or services.

Licensees obtained control

of the intellectual property rights they have acquired upon execution of the agreement.

Accordingly, the performance obligations from

these agreements were satisfied and 100% of the revenue was recognized upon the execution of the agreements.

compensation cost for service-based stock options granted to employees, directors and consultants is measured at the grant date, based

on the fair value of the award using the Black-Scholes pricing model, and is recognized as an expense on a straight-line basis over the

requisite service period (the vesting period of the stock option) which is one to four years.

For employee options vesting if the trading

price of the Company’s common stock exceeds certain price targets, we use a Monte Carlo Simulation in estimating the fair value

at grant date and recognize compensation cost over the implied service period.

stock awards granted to employees and directors that vest at date of grant we recognize expense based on the grant date market price

of the underlying common stock.

For restricted stock awards vesting upon achievement of a price target of our common stock, we use a

Monte Carlo Simulation in estimating the fair value at grant date and recognize compensation cost over the implied service period (median

time to vest).

Black-Scholes pricing model and the Monte Carlo Simulation we use to estimate fair value requires valuation assumptions of expected term,

expected volatility, risk-free interest rates and expected dividend yield.

The expected term of stock options represents the weighted

average period the stock options are expected to remain outstanding.

For employees we use the simplified method, which is a weighted

average of the vesting term and contractual term, to determine expected term.

The simplified method was adopted since we do not believe

that historical experience is representative of future performance because of the impact of the changes in our operations and the change

in terms from historical options.

For consultants we use the contract term for expected term.

Under the Black-Scholes pricing model,

we estimated the expected volatility of our shares of common stock based upon the historical volatility of our share price over a period

of time equal to the expected term of the grants.

We estimated the risk-free interest rate based on the implied yield available on the

applicable grant date of a U.S.

Treasury note with a term equal to the expected term of the underlying grants.

We made the dividend yield

assumption based on our history of not paying dividends and our expectation not to pay dividends in the future.

will reconsider use of the Black-Scholes pricing model and the Monte Carlo Simulation if additional information becomes available in

the future that indicates another model would be more appropriate.

If factors change and we employ different assumptions in future periods,

the compensation expense that we record may differ significantly from what we have recorded in the current period.

and Development Expenses

recognize research and development expenses as incurred.

Advance payments for future research and development activities are deferred

and expensed as the services are performed.

We recognize our preclinical studies and clinical trial expenses based on the services performed

pursuant to contracts with research institutions, clinical research organizations (“CROs”), clinical manufacturing organizations

(“CMOs”), and other parties that conduct and manage various stages of research and development activities on our behalf.

Fees for such services are recognized based on management’s estimates after considering the activities and tasks completed by each

service provider in a given period, the time period over which services are expected to be performed, and the level of effort expended

in each reporting period.

each balance sheet date, management estimates prepaid and accrued research and development costs by discussing progress or stage of completion

of activities with internal personnel and external service providers, and comparing this information to payments made, invoices received,

and the agreed-upon contractual fee to be paid for such services in the applicable contract or statements of work.

addition, we allocate certain internal compensation costs to research and development expenses based on management’s estimates

of each employee’s time and effort expended.

OF RECENTLY ISSUED PRONOUNCEMENTS

discuss the effect of recently issued pronouncements in Note 7 of the condensed consolidated financial statements, included elsewhere in this Report.

Quantitative and Qualitative Disclosures About Market Risk.

(i) the grant of a non-exclusive, retroactive

and future license to manufacture and/or sell products covered by patented technologies owned or controlled by the Company, (ii) a covenant-not-to-sue,

(iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation.

In such instances, the intellectual

property rights granted have been perpetual in nature, extending until the expiration of the related patents.

Pursuant to the terms of

these agreements, we have no further obligations with respect to the granted intellectual property rights, including no obligation to

maintain or upgrade the technology, or provide future support or services.

Licensees obtained control of the intellectual property rights

they have acquired upon execution of the agreement.

Accordingly, the performance obligations from these agreements were satisfied and

100% of the revenue was recognized upon the execution of the agreements.

Stock-Based Compensation

The compensation cost for service-based

stock options granted to employees, directors and consultants is measured at the grant date, based on the fair value of the award using

the Black-Scholes pricing model, and is recognized as an expense on a straight-line basis over the requisite service period (the vesting

period of the stock option) which is one to four years.

For employee options vesting if the trading price of the Company’s common

stock exceeds certain price targets, we use a Monte Carlo Simulation in estimating the fair value at grant date and recognize compensation

cost over the implied service period.

For stock awards granted to employees

and directors that vest at date of grant we recognize expense based on the grant date market price of the underlying common stock.

restricted stock awards vesting upon achievement of a price target of our common stock, we use a Monte Carlo Simulation in estimating

the fair value at grant date and recognize compensation cost over the implied service period (median time to vest).

The Black-Scholes pricing model

and the Monte Carlo Simulation we use to estimate fair value requires valuation assumptions of expected term, expected volatility, risk-free

interest rates and expected dividend yield.

The expected term of stock options represents the weighted average period the stock options

are expected to remain outstanding.

For employees we use the simplified method, which is a weighted average of the vesting term and contractual

term, to determine expected term.

The simplified method was adopted since we do not believe that historical experience is representative

of future performance because of the impact of the changes in our operations and the change in terms from historical options.

For consultants

we use the contract term for expected term.

Under the Black-Scholes pricing model, we estimated the expected volatility of our shares

of common stock based upon the historical volatility of our share price over a period of time equal to the expected term of the grants.

We estimated the risk-free interest rate based on the implied yield available on the applicable grant date of a U.S.

Treasury note with

a term equal to the expected term of the underlying grants.

We made the dividend yield assumption based on our history of not paying dividends

and our expectation not to pay dividends in the future.

We will reconsider use of the

Black-Scholes pricing model and the Monte Carlo Simulation if additional information becomes available in the future that indicates another

model would be more appropriate.

If factors change and we employ different assumptions in future periods, the compensation expense that

we record may differ significantly from what we have recorded in the current period.

Research and Development Expenses

We recognize research and development

expenses as incurred.

Advance payments for future research and development activities are deferred and expensed as the services are performed.

We recognize our preclinical studies and clinical trial expenses based on the services performed pursuant to contracts with research institutions,

clinical research organizations (“CROs”), clinical manufacturing organizations (“CMOs”), and other parties that

conduct and manage various stages of research and development activities on our behalf.

Fees for such services are recognized based on

management’s estimates after considering the activities and tasks completed by each service provider in a given period, the time

period over which services are expected to be performed, and the level of effort expended in each reporting period.

At each balance sheet date, management

estimates prepaid and accrued research and development costs by discussing progress or stage of completion of activities with internal

personnel and external service providers, and comparing this information to payments made, invoices received, and the agreed-upon contractual

fee to be paid for such services in the applicable contract or statements of work.

In addition, we allocate certain

internal compensation costs to research and development expenses based on management’s estimates of each employee’s time and

effort expended.

EFFECT OF RECENTLY ISSUED PRONOUNCEMENTS

We discuss the effect of recently

issued pronouncements in Note 7 of the condensed consolidated financial statements, included elsewhere in

and Qualitative Disclosures About Market Risk.

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis