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Item 7. Management’s Discussion and Analysis

2023-03-31 compared with 2022-03-25 · 293 added, 297 removed, 50 unchanged (92% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

information and financial data discussed below is derived from the audited consolidated financial statements of Actinium Pharmaceuticals,

for its fiscal years ended December 31, 2021 and 2020.

The consolidated financial statements of Actinium Pharmaceuticals,

were prepared and presented in accordance with generally accepted accounting principles in the United States.

The information and

financial data discussed below is only a summary and should be read in conjunction with the historical financial statements and related

notes of Actinium Pharmaceuticals, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The information and financial

data discussed below is derived from the audited consolidated financial statements of Actinium Pharmaceuticals, Inc.

for its fiscal years

ended December 31, 2022 and 2021.

The consolidated financial statements of Actinium Pharmaceuticals, Inc.

were prepared and presented

in accordance with generally accepted accounting principles in the United States.

The information and financial data discussed below is

only a summary and should be read in conjunction with the historical financial statements and related notes of Actinium Pharmaceuticals,

contained elsewhere in this Report.

The financial statements contained elsewhere in this

Report fully represent Actinium Pharmaceuticals, Inc.’s financial condition and operations;

however, they are not indicative of

the Company’s future performance.

See “Cautionary Note Regarding Forward-Looking Statements” above for a discussion

of forward-looking statements and the significance of such statements in the context of this Report.

Actinium Pharmaceuticals, Inc.

is a clinical-stage, biopharmaceutical

company applying its proprietary platform technology and deep understanding of radiobiology to the development of novel targeted radiotherapies

for patients with unmet needs.

Our targeted radiotherapies combine the cell-killing ability of radiation via a radioisotope payload with

a targeting agent, such as a monoclonal antibody, to deliver radiation in a precise manner inside the body to specific, targeted cells,

to potentially achieve greater efficacy with lower toxicity than with external beam radiation.

They also enable a broader usage of radiation

than external beam radiation as they can be used in the treatment of both solid tumors and blood cancers, which generally cannot be treated

with external radiation given their diffuse nature.

Our clinical pipeline is focused on targeting the antigens CD45 and CD33, both of

which are expressed in multiple hematologic cancers, which are known to be highly sensitive to radiation.

Our clinical programs are focused

on two primary areas:

(1) targeted conditioning prior to a bone marrow transplant (“BMT”), adoptive cell therapy (“ACT”)

such as CAR-T or gene therapy with Iomab-B and (2) targeted radiotherapy combinations with Actimab-A and other therapeutic agents.

product development strategy is actively informed by clinical data with Iomab-B and Actimab-Ain approximately 600 patients, including

our ongoing Pivotal Phase 3 SIERRA trial, which completed enrollment of 150 patients in the third quarter of 2021 with the last patient

receiving their BMT in the fourth quarter of 2021.

Our clinical pipeline has emanated from our Antibody Warhead Enabling (“AWE”)

technology platform, which is protected by over 170 issued and pending patents, trade secrets and know-how that we are applying to the

development of targeted radiotherapies for blood and solid tumor indications independently and with collaborators.

Ongoing collaborations

include a research partnership with Astellas Pharma, Inc.

(“Astellas”) focused on the development of theranostics for solid

tumor indications, a collaboration with EpicentRx, Inc, focused on a novel CD47 immunotherapy targeted radiotherapy combination leveraging

EpicentRx’s RRx-01, that is being studied in a Phase 3 trial in non-small cell lung cancer, with our clinical stage Actimab-A in

AML models, and a collaboration with AVEO Oncology, focused on developing a HER3 targeting ARC for solid tumors leveraging their clinical

stage antibodies.

We are also utilizing our AWE technology platform to advance our research objectives focused on developing next-generation

targeted radiotherapies with our expanded research and development organization and research laboratories leveraging our drug development

of COVID–19 Pandemic

global health crisis caused by the novel coronavirus COVID-19 pandemic and its resurgences has and may continue to negatively impact

global economic activity, which, despite progress in vaccination efforts, remains uncertain and cannot be predicted with confidence.

In addition, the Omicron variant of COVID-19, which appears to be the most transmissible variant to date, has spread globally.

impact of the Omicron variant, or any subsequent variant, cannot be predicted at this time, and could depend on numerous factors, including

vaccination rates among the population, the effectiveness of COVID-19 vaccines against the Omicron variant and the response by governmental

bodies and regulators.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the COVID-19

pandemic on our business.

countries around the world have continued to impose quarantines and restrictions on travel and mass gatherings to slow the spread of

Accordingly, our ability to continue to operate our business may also be limited.

Such events may result in a period of business,

supply and drug product manufacturing disruption, and in reduced operations, any of which could materially affect our business, financial

condition and results of operations.

In response to COVID-19, we implemented remote working and thus far have not experienced a significant

disruption or delay in our operations as it relates to the clinical development of our drug candidates.

Such government-imposed precautionary

measures may have been relaxed in certain countries or states, but there is no assurance that more strict measures will be put in place

again due to a resurgence in COVID-19 cases, including those involving new variants of the coronavirus, which may be more contagious

and deadly than prior strains.

Therefore, the COVID-19 pandemic may continue to affect our operation, may further divert the attention

and efforts of the medical community to coping with COVID-19 and disrupt the marketplace in which we operate and may have a material

adverse effect on our operations.

continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our

ability to access capital, which could in the future negatively affect our liquidity.

In addition, a recession or market correction resulting

from the spread of COVID-19 could materially affect our business and the value of our common stock.

believe our earlier stage CD33 clinical trials will continue to recruit and enroll patients given the acute nature of relapsed or refractory

The continuation of the pandemic could adversely affect our planned clinical trial operations, including our ability to conduct

the trials on the expected timelines and recruit and retain patients and principal investigators and site staff who, as healthcare providers,

may have heightened exposure to COVID-19 if their geography is impacted by the pandemic.

Further, the continuation and/or resurgence

of the COVID-19 pandemic could result in delays in our clinical trials due to prioritization of hospital resources toward the pandemic,

restrictions in travel, potential unwillingness of patients to enroll in trials at this time, or the inability of patients to comply

with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services.

we rely on independent clinical investigators, contract research organizations and other third-party service providers to assist us in

managing, monitoring and otherwise carrying out our preclinical studies and clinical trials, and the pandemic may affect their ability

to devote sufficient time and resources to our programs or to travel to sites to perform work for us, which may result in delays or hinder

our ability to collect data from our clinical trials.

Additionally,

COVID-19 may result in delays in receiving approvals from local and foreign regulatory authorities, delays in necessary interactions

with IRB’s or Institutional Review Boards, local and foreign regulators, ethics committees and other important agencies and contractors

due to limitations in employee resources or forced furlough of government employees.

date, COVID-19 has not had a financial impact on our company.

We continue to monitor the impacts of COVID-19 on the global economy and

on our business operations.

Although we expect that vaccinations for COVID-19 will continue to improve conditions, the ultimate impact

from COVID-19 on our business operations and financial results during 2022 will depend on, among other things, the ultimate severity

and scope of the pandemic, including the new variants of the virus, the pace at which governmental and private travel restrictions and

public concerns about public gatherings will ease, the rate at which historically large increases in unemployment rates will decrease,

if at all, and whether, and the speed with which the economy recovers.

We are not able to fully quantify the impact that these factors

will have on our financial results during 2022 and beyond.

of Operations – Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

following table sets forth, for the periods indicated, data derived from our statements of operations:

For the year s ended

(in thousands)

The financial statements contained elsewhere in this Report fully represent Actinium Pharmaceuticals,

Inc.’s financial condition and operations;

however, they are not indicative of the Company’s future performance.

See “Cautionary

Note Regarding Forward-Looking Statements” above for a discussion of forward-looking statements and the significance of such statements

in the context of this Report.

Actinium Pharmaceuticals,

is a clinical-stage, biopharmaceutical company applying its proprietary platform technology and clinical experience to develop novel

targeted radiotherapies for patients with unmet needs.

Our targeted radiotherapies combine the cell-killing ability of radiation via a

radioisotope payload with a targeting agent, such as a monoclonal antibody, to deliver radiation in a precise manner inside the body to

specific, targeted cells such as cancer cells, to potentially achieve greater efficacy with lower toxicity than with cytotoxic chemotherapy

or external beam radiation.

Targeted radiotherapies also enable broader application of radiation than external beam radiation as they

can be used in the treatment of both solid tumors and blood cancers, which generally cannot be treated with external radiation given their

diffuse nature.

Results of Operations – Year Ended December

31, 2022 Compared to the Year Ended December 31, 2021

The following table sets forth,

for the periods indicated, data derived from our statements of operations:

For the years ended

(amounts in thousands)

Other revenue

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Total other income

recorded no commercial revenues for the years ended December 31, 2021 and 2020, respectively.

determined that certain collaborations with a third-party are within the scope of Topic ASC 606, Revenue Recognition from Contracts

with Customers, or ASC 606.

We recorded no commercial

revenues for the years ended December 31, 2022 and 2021, respectively.

Other revenue

We determined that certain

collaborations with a third-party are within the scope of Topic ASC 606, Revenue Recognition from Contracts with Customers, or

The collaboration agreement is made up of multiple modules related to various research activities.

the third party has the option to terminate the agreement at the conclusion of any module, we identified a single performance obligation

to provide research services within each module for which we receive monetary consideration.

We recognized revenue during the year ended

December 31, 2021 of $0.9 million from these collaborations.

The National Institutes of Health

awarded us a Small Business Technology Transfer cost reimbursable grant to support a clinical collaboration with Memorial Sloan Kettering

Cancer Center, or MSK, to study Iomab-ACT, our CD45-targeting Antibody Radio-Conjugate, for targeted conditioning to achieve lymphodepletion

prior to administration of a CD19-targeted CAR T-cell therapy developed at MSK.

We recognized revenue of $0.2 million from this grant

during the year ended December 31, 2021.

recorded no other revenue for the year ended December 31, 2020.

and Development Expense

and development expenses increased by $1.9 million to $18.0 million for the year ended December 31, 2021 compared to $16.1 million for

the year ended December 31, 2020.

The increase was primarily due to expenses related to our research activities at our laboratory space

and government grant program and higher compensation expense resulting from the hiring of additional employees.

and Administrative Expenses

While the third party has

the option to terminate the agreement at the conclusion of any module, we identified a single performance obligation to provide research

services within each module for which we receive monetary consideration.

The consideration is recognized as revenue over each module and

revenue of $0.9 million was recognized during each of the years ended December 31, 2022 and December 31, 2021.

The National Institutes of

Health awarded us a Small Business Technology Transfer cost reimbursable grant to support a clinical collaboration with Memorial Sloan

Kettering Cancer Center, or MSK, to study Iomab-ACT, our CD45-targeting Antibody Radio-Conjugate, for targeted conditioning to achieve

lymphodepletion prior to administration of a CD19-targeted CAR T-cell therapy developed at MSK.

We recognized other revenue during the

years ended December 31, 2022 and 2021 of $0.1 million and $0.2 million, respectively, from this grant.

On April 7, 2022, we entered

into a license and supply agreement with Immedica Pharma AB, or Immedica, pursuant to which Immedica licensed the exclusive product rights

for commercialization of Iomab-B in the European Economic Area, Middle East and North Africa (EUMENA) including Algeria, Andorra, Bahrain,

Cyprus, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Monaco, Morocco, Oman, Palestine, Qatar, San Marino, Saudi Arabia,

Switzerland, Syria, Tunisia, Turkey, the United Arab Emirates, the United Kingdom, the Vatican City and Yemen.

Upon signing, we were entitled

to an upfront payment of $35 million from Immedica, which was received in May 2022.

Under the terms of the License Agreement, we are eligible

to receive regulatory and commercial milestone payments and are entitled to receive royalties in the mid-20 percent range on net sales

of the product in certain countries that may result from the License Agreement.

We will continue to be responsible for certain clinical

development activities and the manufacturing of Iomab-B and will retain commercialization rights in the U.S.

and rest of the world.

Our contract liabilities are

recorded within Other revenue deferred – current liability or Long-term license revenue deferred in our condensed consolidated balance

sheets depending on the short-term or long-term nature of the payments to be recognized.

Our contract liabilities primarily consist of

advanced payments from licensees.

There was no Other revenue deferred-current liability at December 31, 2022, Other revenue deferred –

current liability was $1.0 million at December 31, 2021.

Long-term license revenue deferred was $35.0 million at December 31, 2022, resulting

from the receipt from Immedica;

there was no Long-term license revenue deferred at December 31, 2021.

This deferred revenue will be recognized

upon European Union regulatory approval of Iomab B.

Research and Development Expense, net of reimbursements

Research and development expenses increased by $5.1 million to $23.1

million for the year ended December 31, 2022 compared to $18.0 million for the year ended December 31, 2021.

Higher expenses were primarily

due to increased CMC activity related to Iomab-B, as well as increased compensation of $1.0 million resulting from increased headcount.

General and Administrative Expenses

General and administrative

expenses increased by $3.9 million to $12.0 million for the year ended December 31, 2022 compared to $8.1 million for the year ended December

31, 2020, primarily attributable to higher professional fees and consulting fees including recruitment costs, business taxes and fees,

and insurance premiums for director and officer liability.

income of $0.2 million for both time periods was attributable to interest income - net as a higher average balance of cash and cash equivalents

offset a lower average interest rate.

Net loss increased by $2.6

million to $24.8 million for the year ended December 31, 2021 compared to $22.2 million for the year ended December 31, 2020, primarily

due to higher general and administrative expenses and research and development expenses, partially offset by other revenue.

and Capital Resources

have financed our operations primarily through sales of our common stock, pre-funded warrants and warrants.

following tables sets forth selected cash flow information for the periods indicated:

Higher expenses were primarily due to increased compensation of $0.9 million, increased non-cash equity compensation of $1.0

million, higher professional fees and consulting fees including recruitment costs, and higher legal fees.

Other income is comprised

of net interest income in both reporting periods.

Other income of $1.1 million for the year ended December 31, 2022 increased from $0.2

million for the year ended December 31, 2021 due to a higher average balance and higher interest rates.

Net loss increased by $8.2 million to $33.0 million for the year ended

December 31, 2022 compared to $24.8 million for the year ended December 31, 2021, primarily due to higher research and development expenses

and general and administrative expenses, partially offset by other income.

Liquidity and Capital Resources

Historically, we have financed

our operations primarily through sales of our common stock and common stock equivalents.

The following tables sets forth selected cash

flow information for the periods indicated:

For the years ended

(in thousands)

Cash used in operating activities

(amounts in thousands)

Cash provided by/used in operating activities

Cash used in investing activities

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Net change in cash, cash equivalents and restricted cash

Net cash used in operating

activities for the year ended December 31, 2021 of $20.9 million decreased by $0.7 million from $21.6 million for the year ended December

31, 2020, primarily due to the increased net loss of $2.6 million being more than offset by increased liabilities and increased accounts

payable due to the timing of payments to vendors.

cash used in investing activities of $133 thousand and $253 thousand for the years ended December 31, 2021 and December 31, 2020, respectively,

primarily due to the purchase of equipment for our laboratory space.

cash provided by financing activities for the year ended December 31, 2021 was $35.2 million, primarily from the sale of shares of our

common stock.

In August 2020 we entered into the Capital on Demand™ Sales Agreement with JonesTrading Institutional Services LLC,

or JonesTrading, pursuant to which we may sell, from time to time, through or to JonesTrading, up to an aggregate of $200 million of

our common stock.

Shares of common stock are offered pursuant to our shelf registration statement on Form S-3 filed with the United States

Securities and Exchange Commission, or SEC, on August 7, 2020.

As of December 31, 2020, we had sold 2.1 million shares of common stock,

resulting in gross proceeds of $22.6 million and net proceeds of $21.7 million.

For the year ended December 31, 2021, we sold 4.6 million

shares of common stock, resulting in gross proceeds of $36.5 million and net proceeds of $35.3 million.

cash provided by financing activities for the year ended December 31, 2020 was mainly generated by the sale of shares of common stock,

pre-funded warrants and warrants.

Net cash provided by financing activities was $76.2 million for the year ended December 31, 2020, reflecting

$76.6 million in proceeds from the sales of common stock and pre-funded warrants in April and June 2020 and sales of common stock throughout

April 24, 2020, we issued and sold 4.3 million shares of common stock and pre-funded warrants to purchase 2.8 million shares of common

The price to the public for each share of common stock sold in the offering was $4.50, and the price to the public for each pre-funded

warrant sold in the offering was $4.497.

The pre-funded warrants were exercisable at an exercise price of $0.003 per share and were exercisable

immediately upon issuance.

Gross proceeds from this offering were $31.6 million, before deducting underwriting discounts and commissions

and other offering expenses payable by us.

Net proceeds from the offering were approximately $29.1 million.

June 19, 2020, we issued and sold 1.9 million shares of common stock and pre-funded warrants to purchase 0.7 million shares of common

The price to the public in this offering for each share of common stock was $9.75 and for each pre-funded warrant was $9.747.

Each pre-funded warrant had an exercise price of $0.003 per share and were exercisable immediately upon issuance.

Gross proceeds from

this offering to us were $25.0 million, before deducting underwriting discounts and commissions and other offering expenses payable us.

Net proceeds from this offering were approximately $23.0 million.

the year ended December 31, 2020, holders of all 2.8 million pre-funded April 2020 warrants and 0.7 million pre-funded June 2020 warrants

exercised their pre-funded warrants at $0.003 per share and received 2.8 million shares of common stock and 0.7 million shares of common

stock, respectively.

Net cash provided by operating

activities for the year ended December 31, 2022 of $8.6 million increased by $29.5 million from a use of funds of $20.9 million for the

year ended December 31, 2021.

This increase was due to the receipt of the $35.0 million up-front payment from Immedica.

Net cash used in investing

activities was $0.4 million and $0.1 million for the years ended December 31, 2022 and December 31, 2021, respectively, primarily due

to the purchase of equipment for our laboratory space.

In August 2020 we entered

into the Capital on Demand™ Sales Agreement with JonesTrading Institutional Services LLC, or JonesTrading, pursuant to which we

would be able to sell, from time to time, through or to JonesTrading, up to an aggregate of $200 million of its common stock.

28, 2022, we entered into an Amendment and Restated Capital on Demand™ Sales Agreement, or the Amended Sales Agreement, with JonesTrading

Riley Securities, Inc.

The Amended Sales Agreement modifies the original Capital on Demand™ Sales Agreement to include B.

Riley as an additional sales agent thereunder.

Shares of common stock are offered pursuant to a shelf registration statement on Form S-3

filed with the SEC on August 7, 2020.

For the year ended December 31, 2022, we sold 3.5 million shares of common stock, resulting in gross

proceeds of $23.9 million and net proceeds of $23.2 million.

For the year ended December 31, 2021, we sold 4.6 million shares of common

stock, resulting in gross proceeds of $36.5 million and net proceeds of $35.3 million.

As of December 31, 2022, we have sold 10.2 million

shares of common stock, resulting in gross proceeds of $83.0 million and net proceeds of $80.2 million relating to the Sales Agreement,

We entered into a lease for

corporate office space effective June 1, 2022 and paid a security deposit to the landlord.

The lease has a term of 5 years 2 months, with

an expiration date in 2027, and current annual rent of $0.6 million.

We are also responsible for certain other costs, such as insurance,

utilities and maintenance.

In July 2022, a certificate of deposit was provided as collateral for a letter of credit and the security deposit

was returned.

We will require additional

19 unchanged sentences

business, and other factors beyond our control.

The ongoing COVID-19 pandemic has caused an unstable economic environment globally.

in the global financial markets may adversely impact the availability and cost of credit, as well as our ability to raise money in the

capital markets.

Current economic conditions have been, and continue to be, volatile.

Continued instability in these market conditions

may limit our ability to access the capital necessary to fund and grow our business.

Continued instability

in these market conditions may limit our ability to access the capital necessary to fund and grow our business.

Off-Balance Sheet Arrangements

We do not have any off-balance

sheet arrangements.

do not have any off-balance sheet arrangements.

Accounting Policies

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.

items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in

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

Value of Financial Instruments

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.

recognize revenue in accordance with ASC 606.

Under ASC 606, we recognize revenue when our customer obtains control of promised goods

or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

revenue recognition for arrangements within the scope of ASC 606, we perform the following five steps:

(i) identify the contract(s) with

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price, including variable consideration,

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue as we satisfy a

performance obligation.

We only apply the five-step model to contracts when it is probable that we will collect the consideration to

which we are entitled in exchange for the goods or services we transfer to the customer.

contract inception, once the contract is determined to be within the scope of ASC 606, we assess whether the promised goods or services

promised within each contract are distinct and, therefore, represent a separate performance obligation.

Goods and services that

are determined not to be distinct are combined with other promised goods and services until a distinct bundle is identified.

In determining

whether goods or services are distinct, we evaluate certain criteria, including whether (i) the customer can benefit from the good

or service either on its own or together with other resources that are readily available to the customer (capable of being distinct)

and (ii) the good or service is separately identifiable from other goods or services in the contract (distinct in the context of

the contract).

606 requires us to allocate the arrangement consideration on a relative standalone selling price basis for each performance obligation

after determining the transaction price of the contract and identifying the performance obligations to which that amount should be allocated.

The relative standalone selling price is defined in the new revenue standard as the price at which an entity would sell a promised good

or service separately to a customer.

We then recognize as revenue the amount of the transaction price that is allocated to the respective

performance obligation as each performance obligation is satisfied, either at a point in time or over time, and if over time, recognition

is based on the use of an output or input method.

Collaborative

Critical Accounting Policies

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.

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 Measurement

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.

Revenue Recognition

We recognize revenue in accordance

with ASC 606.

Under ASC 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects

the consideration that we expect to receive in exchange for those goods or services.

To determine revenue recognition for arrangements

within the scope of ASC 606, we perform the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the performance

obligations in the contract;

(iii) determine the transaction price, including variable consideration, if any;

(iv) allocate the transaction

price to the performance obligations in the contract;

and (v) recognize revenue as we satisfy a performance obligation.

We only apply

the five-step model to contracts when it is probable that we will collect the consideration to which we are entitled in exchange for the

goods or services we transfer to the customer.

At contract inception, once

the contract is determined to be within the scope of ASC 606, we assess whether the promised goods or services promised within each contract

are distinct and, therefore, represent a separate performance obligation.

Goods and services that are determined not to be distinct

are combined with other promised goods and services until a distinct bundle is identified.

In determining whether goods or services are

distinct, we evaluate certain criteria, including whether (i) the customer can benefit from the good or service either on its own

or together with other resources that are readily available to the customer (capable of being distinct) and (ii) the good or service

is separately identifiable from other goods or services in the contract (distinct in the context of the contract).

ASC 606 requires us to allocate

the arrangement consideration on a relative standalone selling price basis for each performance obligation after determining the transaction

price of the contract and identifying the performance obligations to which that amount should be allocated.

The relative standalone selling

price is defined in the new revenue standard as the price at which an entity would sell a promised good or service separately to a customer.

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation as each performance

obligation is satisfied, either at a point in time or over time, and if over time, recognition is based on the use of an output or input

Collaborative Arrangements

We follow the accounting guidance

6 unchanged sentences

we follow the guidance of ASC 606 .

and Development Costs

and development costs are expensed as incurred.

These costs include the costs of manufacturing drug components and final drug product,

the costs of clinical trials, costs of employees and associated overhead, and depreciation and amortization costs related to facilities

and equipment.

Research and development reimbursements are recorded by us as a reduction of research and development costs.

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.

Grant Revenue

We had a grant from a government-sponsored

entity for research and development related activities that provided for payments for reimbursed costs, which included overhead and general

and administrative costs as well as an administrative fee.

We recognized revenue from the grant as we performed services under this arrangement.

Associated expenses were recognized when incurred as research and development expense.

Revenue and related expenses are presented gross

in the consolidated statements of operations.

License Revenue

We entered into a product

licensing agreement whereby we allowed a third party to commercialize a certain product in specified territories using our trademarks.

The terms of this arrangement includes payment to us for a combination of one or more of the following:

upfront license fees;

regulatory and sales-based milestone payments;

and royalties on net sales of licensed products.

We use judgment to determine whether milestones

or other variable consideration should be included in the transaction price.

Upfront license fees :

If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement,

we will recognize revenue from upfront license fees allocated to the license when the license is transferred to the licensee and the licensee

is able to use and benefit from the license.

For licenses that are bundled with other promises, we determine whether the combined performance

obligation is satisfied over time or at a point in time.

Development, regulatory

or commercial milestone payments :

At the inception of each arrangement that includes payments based on the achievement of certain

development, regulatory and sales-based or commercial events, we evaluate whether the milestones are considered probable of being achieved

and estimate the amount to be included in the transaction price using the most likely amount method.

If it is probable that a significant

revenue reversal would not occur, the associated milestone value is included in the transaction price.

Milestone payments that are not

within our or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until regulatory

approval is received.

At the end of each subsequent reporting period, we will re-evaluate the probability of achieving such development

and regulatory milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price.

adjustments are recorded on a cumulative catch-up basis and recorded as part of license revenues during the period of adjustment.

Sales-based milestone payments

and royalties :

For arrangements that include sales-based royalties, including milestone payments based on the volume of sales, we

will determine whether the license is deemed to be the predominant item to which the royalties or sales-based milestones relate and if

such is the case, we will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation

to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Upfront payments and fees

may require deferral of revenue recognition to a future period until we perform our obligations under these arrangements or when it is

probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with

any variable consideration is subsequently resolved.

Amounts payable to us are recorded as accounts receivable when our right to consideration

is unconditional.

Research and Development Costs

Research and development costs

are expensed as incurred.

These costs include the costs of manufacturing drug components and final drug product, the costs of clinical

trials, costs of employees and associated overhead, and depreciation and amortization costs related to facilities and equipment.

and development reimbursements are recorded by us as a reduction of research and development costs.

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

We account for forfeitures of stock options as they occur.

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.

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.

Standards Recently Adopted

August 2020, FASB issued ASU 2020-06, Debt— Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts

in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ,

which, among other things, provides guidance on how to account for contracts on an entity’s own equity.

This ASU simplifies the

accounting for certain financial instruments with characteristics of liabilities and equity.

Specifically, the ASU eliminated the need

for us to assess whether a contract on our own equity (1) permits settlement in unregistered shares, (2) whether counterparty rights

rank higher than shareholder’s rights, and (3) whether collateral is required.

In addition, the ASU requires incremental disclosure

related to contracts on our own equity and clarifies the treatment of certain financial instruments accounted for under this ASU on earnings

This ASU may be applied on a full retrospective of modified retrospective basis.

This ASU is effective January 1, 2022 and

interim periods presented, although early adoption of this ASU was permitted effective January 1, 2021.

We early adopted this standard

effective January 1, 2021 and the standard did not have a significant impact on our financial statements.

Standards Recently Issued

May 2021, FASB issued ASU 2021-04, Earnings Per Share (topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50),

Compensation – Stock Compensation (Topic 718) and Derivatives and Hedging – Contracts in an Entity’s Own Equity (Subtopic

815-40) – Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options ,

which provides guidance of a modification or an exchange of a freestanding equity-classified written call option that remains equity

classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share (EPS) effects, if

any, or (2) an expense and, if so, the manner and pattern of recognition.

The amendments in this ASU are effective January 1, 2022, including

interim periods.

Early adoption is permitted.

We will apply the amendments prospectively to modifications or exchanges occurring on or

after January 1, 2022.

We will evaluate the impact of ASU 2017-09 on any future changes to the terms and conditions of its warrants.

October 2021, FASB issued ASU 2021-08, Business Combinations (Topic 805), Account for Contract Assets and Contract Liabilities from

Contracts with Customers , which provides guidance on accounting for contract assets and contract liabilities acquired in a business

combination in accordance ASC 606.

To achieve this, an acquirer may assess how the acquiree applied ASC 606 to determine what to record

for the acquired revenue contracts.

Generally, this should result in an acquirer recognizing and measuring the acquired contract assets

and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements.

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

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.

interest related to unrecognized tax benefits in interest expense and penalties in operating expenses.

Accounting Standards Recently Adopted

In May 2021, the Financial

Accounting Standards Board, or FASB, issued ASU 2021-04, Earnings Per Share (topic 260), Debt — Modifications and Extinguishments

(Subtopic 470-50), Compensation – Stock Compensation (Topic 718) and Derivatives and Hedging – Contracts in an Entity’s

Own Equity (Subtopic 815-40) – Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified

Written Call Options , which provides guidance of a modification or an exchange of a freestanding equity-classified written call option

that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share

(EPS) effects, if any, or (2) an expense and, if so, the manner and pattern of recognition.

The amendments in this ASU are effective January

1, 2022, including interim periods.

We adopted this standard effective January 1, 2022 and the standard did not have a material effect

on our financial statements.

In November 2021, the FASB

issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance , which provides

guidance on disclosure requirements to entities other than not-for-profit entities about transaction with a government that are accounted

for by applying a grant or contribution accounting model by analogy.

ASU 2021-10 requires an entity to make annual disclosures related

to (1) the nature of the transactions and the related accounting policy used to account for the government transactions, (2) quantification

and disclosure of amounts related to the government transactions included in balance sheet and income statement financial statement line

items, and (3) significant terms and conditions of the government transactions, including commitments and contingencies.

The amendments

of ASU 2021-10 are effective January 1, 2022, including interim periods.

Early adoption is permitted, including adoption in an interim

The Company will evaluate the impact of ASU 2021-08 on any future business combinations the Company may enter in the future.

November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance ,

which provides guidance on disclosure requirements to entities other than not-for-profit entities about transaction with a government

that are accounted for by applying a grant or contribution accounting model by analogy.

ASU 2021-10 requires an entity to make annual

disclosures related to (1) the nature of the transactions and the related accounting policy used to account for the government transactions,

(2) quantification and disclosure of amounts related to the government transactions included in balance sheet and income statement financial

statement line items, and (3) significant terms and conditions of the government transactions, including commitments and contingencies.

The amendments of ASU 2021-10 are effective January 1, 2022, including interim periods.

The adoption of ASU 2021-10 is not expected to

have a significant impact on the Company’s financial statements.

We adopted this standard effective January 1, 2022 and the standard

did not have a material impact on our financial statements.

Accounting Standards Recently Issued

In October 2021, FASB

issued ASU 2021-08, Business Combinations (Topic 805), Account for Contract Assets and Contract Liabilities from Contracts with

Customers , which provides guidance on accounting for contract assets and contract liabilities acquired in a business combination

in accordance with ASC 606.

To achieve this, an acquirer may assess how the acquiree applied ASC 606 to determine what to record for

the acquired revenue contracts.

Generally, this should result in an acquirer recognizing and measuring the acquired contract assets

and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements.

amendments of ASU 2021-08 are effective January 1, 2023, including interim periods.

Early adoption is permitted, including adoption

in an interim period.

We will evaluate the impact of ASU 2021-08 on any future business combinations that we may enter in the

Subsequent Event

Since December 31, 2022, we

have sold 0.1 million shares of common stock under our Amended Sales Agreement, resulting in net proceeds of $0.8 million.

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-K

Item 7. Management’s Discussion and Analysis