What changed in this filing

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Item 1A. Risk Factors

2023-11-08 compared with 2023-05-12 · 147 added, 70 removed, 4 unchanged (98% of the section changed)

as described below, there have been no material changes to the Risk Factors previously disclosed in our Form 10-K.

The risks described

in our Form 10-K and below are not the only risks facing our company.

Additional risks and uncertainties not currently known to us or

that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.

Developments Affecting the Financial Services Industry and Concentration of Risk

of March 31, 2023 and December 31, 2022, the Company had cash deposited in certain financial institutions in excess of federally insured

The Company regularly monitors the financial stability of these financial institutions and believes that it is not exposed to

any significant credit risk in cash and cash equivalents.

However, in March and April 2023, certain U.S.

government banking regulators

took steps to intervene in the operations of certain financial institutions due to liquidity concerns, which caused general heightened

uncertainties in financial markets.

While these events have not had a material direct impact on the Companys operations, if further

liquidity and financial stability concerns arise with respect to banks and financial institutions, either nationally or in specific regions,

the Companys ability to access cash or enter into new financing arrangements may be threatened, which could have a material adverse

effect on its business, financial condition and results of operations.

Relating To Our Common Stock

may experience future dilution as a result of future equity offerings or if we issue shares subject to options, warrants, stock awards

or other arrangements.

order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into

or exchangeable for our common stock, including under the Controlled Equity Offering Sales Agreement (the Sales Agreement),

dated as of August 31, 2022, with Cantor Fitzgerald & Co.

(the Agent),

pursuant to which the Company may issue and sell from time to time shares of common stock through the Agent.

We may sell shares or other

securities in any other offering at a price per share that is less than the current market price of our securities, and investors purchasing

shares or other securities in the future could have rights superior to existing stockholders.

The sale of additional shares of common

stock or other securities convertible into or exchangeable for our common stock would dilute all of our stockholders, and if such sales

of convertible securities into or exchangeable into our common stock occur at a deemed issuance price that is lower than the current

exercise price of our outstanding warrants sold to Acuitas Group Holdings, LLC (Acuitas) in August 2022, the exercise price

for those warrants would adjust downward to the deemed issuance price pursuant to price adjustment protection contained within those

addition, as of March 31, 2023, there were warrants outstanding to purchase an aggregate of 7,770,285 shares of common stock

at exercise prices ranging from $1.82 to $12.50 per share and 3,443,997 shares issuable upon exercise of outstanding options at

exercise prices ranging from $1.69 to $42.09 per share and restricted stock units totaling 527,549.

Our Loan Agreement entered into

on November 30, 2021 contains a conversion feature whereby at the option of lender, up to $5 million of the outstanding loan amount may

be converted into shares of common stock at a conversion price of $6.98 per share.

We may grant additional options, warrants or equity

To the extent such shares are issued, the interest of holders of our common stock will be diluted.

we are obligated to issue shares of common stock upon achievement of certain clinical, regulatory and commercial milestones with respect

to certain of our drug candidates (i.e., NE3107, NE3291, NE3413, and NE3789) pursuant to the asset purchase agreement, dated April 27,

2021, by and among the Company, NeurMedix, Inc.

Except as described below, there have been no

material changes to the Risk Factors previously disclosed in our Form 10-K.

The risks described in our Form 10-K and below are not the

only risks facing our company.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial

also may materially adversely affect our business, financial condition, and/or operating results.

Risks Relating to Our Business and Industry

We rely and will continue to rely on third

parties to conduct our clinical trials.

If these third parties do not successfully carry out their contractual duties or meet expected

deadlines or do not successfully perform and comply with regulatory requirements, we may not be able to obtain regulatory approval of

or commercialize our product candidates.

depend, and will continue to depend, on contract research organizations (“CROs”), clinical trial sites and clinical trial

principal investigators, contract laboratories, and other third parties to conduct our clinical trials.

We rely heavily on these third

parties over the course of our clinical trials, and we control only certain aspects of their activities.

Nevertheless, we are responsible

for ensuring that each of our studies is conducted in accordance with the protocol and applicable legal, regulatory, and scientific standards

and regulations, and our reliance on third parties does not relieve us of our regulatory responsibilities.

We and these third parties

are required to comply with current good clinical practices (“cGCPs”), which are regulations and guidelines enforced by the

FDA and comparable foreign regulatory authorities for the conduct of clinical trials on product candidates in clinical development.

authorities enforce cGCPs through periodic inspections and for-cause inspections of clinical trial principal investigators and trial

If we or any of these third parties fail to comply with applicable cGCPs or fail to enroll a sufficient number of patients, we

may be required to conduct additional clinical trials to support our marketing applications, which would delay the regulatory approval

Moreover, our business may be implicated if any of these third parties violates federal, state, or foreign fraud and abuse or

false claims laws and regulations or healthcare privacy and security laws, or provide us or government agencies with inaccurate, misleading,

or incomplete data.

For example, during routine monitoring of blinded data from our Phase 3 study (NCT04669028) of NE3107, we uncovered

what appears to be potential scientific misconduct and significant non-compliance with GCPs and regulation at six sites.

We have alerted

the FDA’s Office of Scientific Integrity (“OSI”) about these issues and believe OSI will perform a thorough, competent,

objective and fair research of any potential scientific misconduct and non-compliance of GCPs and regulation.

Sensitivity analysis excluding

data from these six problematic sites has been performed and accounted for in the statistical analysis plan for the study (NCT04669028).

Nonetheless, these findings of potential scientific misconduct and significant GCP violations may call into question the rigor, robustness

and validity of the entire data set for this study (NCT04669028) and may require additional clinical studies to confirm the final results

of the study.

Although we design the clinical trials for our

product candidates, our CROs are tasked with facilitating and monitoring our clinical trials.

As a result, many important aspects of our clinical

development programs, including site and investigator selection, and the conduct and timing and monitoring of the study, will be partly

or completely outside our direct control.

Our reliance on third parties to conduct clinical trials also results in less direct control

over the collection, management, and quality of data developed through clinical trials than would be the case if we were relying entirely

upon our own employees.

Communicating with third parties can also be challenging, potentially leading to mistakes as well as difficulties

in coordinating activities.

Successful development

of biopharmaceuticals is highly uncertain and is dependent on numerous factors, many of which are beyond our control.

Product candidates that

appear promising in the early phases of development may fail to reach the market for several reasons.

Pre-clinical study results may show

the product candidate to be less effective than desired (e.g., the study failed to meet its primary endpoints) or to have harmful or problematic

side effects.

Product candidates may fail to receive the necessary regulatory approvals or may be delayed in receiving such approvals.

Among other things, such delays may be caused by slow enrollment in clinical studies;

length of time to achieve study endpoints;

time requirements for data analysis;

IND and later NDA preparation;

discussions with the FDA;

an FDA request for additional pre-clinical

or clinical data;

unexpected safety or manufacturing issues;

manufacturing costs;

pricing or reimbursement issues;

clinical sites

deviating from the trial protocol, committing scientific misconduct, or other violations of regulatory requirements – which can

render data from those sites unusable in support of regulatory approval;

or other factors that make the product not economical.

rights of others and their competing products and technologies may also prevent the product from being commercialized.

Success in pre-clinical

and early clinical studies does not ensure that large-scale clinical studies will be successful.

Clinical results are frequently susceptible

to varying interpretations that may delay, limit or prevent regulatory approvals.

The length of time necessary to complete clinical studies

and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly from one product

to the next, and may be difficult to predict.

There can be no assurance that any of our products will develop successfully, and the failure

to develop our products will have a materially adverse effect on our business and will cause you to lose all of your investment.

Adverse Developments Affecting the Financial

Services Industry and Concentration of Risk

As of September 30, 2023, the Company had cash

deposited in certain financial institutions in excess of federally insured levels.

The Company regularly monitors the financial stability

of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents.

in March and April 2023, certain U.S.

government banking regulators took steps to intervene in the operations of certain financial institutions

due to liquidity concerns, which caused general heightened uncertainties in financial markets.

While these events have not had a material

direct impact on the Company’s operations, if further liquidity and financial stability concerns arise with respect to banks and

financial institutions, either nationally or in specific regions, the Company’s ability to access cash or enter into new financing

arrangements may be threatened, which could have a material adverse effect on its business, financial condition and results of operations.

Risks Relating To Our Common Stock

You may experience future dilution as a

result of future equity offerings or if we issue shares subject to options, warrants, stock awards or other arrangements.

In order to raise additional capital, we may in

the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock, including

under the Controlled Equity Offering Sales Agreement (the “Sales Agreement”), dated as of August 31, 2022, with Cantor Fitzgerald

(the “Agent”), pursuant to which the Company may issue and sell from time to time shares of common stock

through the Agent.

We may sell shares or other securities in any other offering at a price per share that is less than the current market

price of our securities, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders.

The sale of additional shares of common stock or other securities convertible into or exchangeable for our common stock would dilute all

of our stockholders, and if such sales of convertible securities into or exchangeable into our common stock occur at a deemed issuance

price that is lower than the current exercise price of our outstanding warrants sold to Acuitas Group Holdings, LLC (“Acuitas”)

in August 2022, the exercise price for those warrants would adjust downward to the deemed issuance price pursuant to price adjustment

protection contained within those warrants.

In addition, as of September 30, 2023, there

were warrants outstanding to purchase an aggregate of 7,770,285 shares of common stock at exercise prices ranging from $1.82 to

$12.50 per share and 3,952,864 shares issuable upon exercise of outstanding options at exercise prices ranging from $1.69 to $42.09 per

share and restricted stock units totaling 557,727.

Our Loan Agreement entered into on November 30, 2021 contains a conversion feature

whereby at the option of lender, up to $5 million of the outstanding loan amount may be converted into shares of common stock at a conversion

price of $6.98 per share.

We may grant additional options, warrants or equity awards.

To the extent such shares are issued, the interest

of holders of our common stock will be diluted.

Moreover, we are obligated to issue shares of

common stock upon achievement of certain clinical, regulatory and commercial milestones with respect to certain of our drug candidates

(i.e., NE3107, NE3291, NE3413, and NE3789) pursuant to the asset purchase agreement, dated April 27, 2021, by and among the Company, NeurMedix,

and Acuitas, as amended on May 9, 2021.

The achievement of these milestones could result

in the issuance of up to 18 million shares of our common stock, further diluting the interest of holders of our common stock.

stockholders who are also officers and directors of the Company may have significant control over our management.

of March 31, 2023, our directors and executive officers and affiliate currently own an aggregate 24,431,826 shares of our common

stock, which currently constitutes 65% of our issued and outstanding common stock.

As a result, directors and executive officers may

have a significant influence on our affairs and management, as well as on all matters requiring member approval, including electing and

removing members of our board of directors, causing us to engage in transactions with affiliated entities, causing or restricting our

sale or merger, and certain other matters.

Our majority shareholder, Mr.

Terren Peizer, may be deemed to beneficially own the shares

held by Acuitas.

Such concentration of ownership and control could have the effect of delaying, deferring or preventing a change in control

of us even when such a change of control would be in the best interests of our stockholders.

may, in the future, issue additional common stock, which would reduce investors percent of ownership and may dilute our share

of March 31, 2023, our Articles of Incorporation, as amended, authorize the issuance of 800,000,000 shares of common stock, and we had 36,153,911

shares of common stock issued and 36,131,311 issued and outstanding.

Accordingly, we may issue up to an additional 752,147,919 shares

of common stock.

The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by

our then existing stockholders.

We may value any common stock in the future on an arbitrary basis.

The issuance of common stock for future

services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, might

have an adverse effect on any trading market for our common stock and could impair our ability to raise capital in the future through

the sale of equity securities.

The achievement of these milestones could result in the issuance of up to 18 million shares

of our common stock, further diluting the interest of holders of our common stock.

Certain stockholders who are also officers

and directors of the Company may have significant control over our management.

As of September 30, 2023, our directors and executive

officers and affiliates currently own aggregate 23,587,296 shares of our Common Stock, which currently constitutes 64.0% of our issued

and outstanding Common Stock.

As a result, directors and executive officers and affiliates may have a significant influence on our affairs

and management, as well as on all matters requiring member approval, including electing and removing members of our Board of Directors,

causing us to engage in transactions with affiliates entities, causing or restricting our sale or merger, and certain other matters.

majority shareholder, Mr.

Terren Peizer, may be deemed to beneficially own the 23,166,210 shares of Common Stock held by Acuitas, which

constitutes 63.0% of our issued and outstanding Common Stock Such concentration of ownership and control could have the effect of delaying,

deferring or preventing a change in control of us even when such a change of control would be in the best interests of our stockholders.

We may, in the future, issue additional

common stock, which would reduce investors’ percent of ownership and may dilute our share value.

As of September 30, 2023, our Articles of Incorporation,

as amended, authorize the issuance of 800,000,000 shares of Common Stock, and we had 36,922,760 shares of Common Stock issued and

36,899,880 issued and outstanding.

Accordingly, we may issue up to an additional 763,100,120 shares of Common Stock.

The future issuance

of Common Stock may result in substantial dilution in the percentage of our Common Stock held by our then existing stockholders.

value any Common Stock in the future on an arbitrary basis.

The issuance of Common Stock for future services or acquisitions or other

corporate actions may have the effect of diluting the value of the shares held by our investors, might have an adverse effect on any trading

market for our Common Stock and could impair our ability to raise capital in the future through the sale of equity securities.

Unregistered sales of equity securities

2 unchanged sentences

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 1A. Risk Factors