Item 7. Management’s Discussion and Analysis
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and
analysis of our financial condition and results of operations in conjunction with the financial statements and the related notes appearing
elsewhere in this Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks
and uncertainties, including those set forth under “Cautionary Statement About Forward-Looking Statements.” Actual results
and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements
as a result of a number of factors, including but not limited to those discussed in this Item and in Item 1A - “Risk Factors.”
Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of
many factors, including those set forth under “Risk Factors” and elsewhere in this Form 10-K.
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Overview
We are a clinical stage pharmaceutical company
organized as a Nevada corporation in July 2017 to focus on the development of anti-cancer drug candidates for the treatment of brain and
central nervous system tumors, based on intellectual property that we license under license agreement Cortice and own pursuant to a collaboration
and asset purchase agreement with Reata.
We believe our drug candidates, TPI 287 and Berubicin,
may be significant developments in the treatment of Glioblastoma and other CNS malignancies, and if approved by the FDA could give Glioblastoma
patients an important new therapeutic alternative to the current standard of care. Glioblastoma are tumors that arise from astrocytes,
which are star-shaped cells making up the supportive tissue of the brain. These tumors are usually highly malignant (cancerous) because
the cells reproduce quickly, and they are supported by a large network of blood vessels. TPI 287 is an abeotaxane (derived from the taxane
family of drugs) and Berubicin is an anthracycline. Both of these are classes of drugs that are among the most powerful and extensively
used chemotherapy drugs known. Based on clinical and preclinical data, we believe TPI 287 is the first taxane to appear to cross the BBB
and Berubicin is the first anthracycline to appear to cross the BBB, both in significant concentrations targeting brain cancer cells.
While our focus is currently on the development of TPI 287 and Berubicin, we are also in the process of attempting to secure intellectual
property rights to additional compounds that we plan to develop into drugs to treat CNS cancers.
TPI 287 represents a promising candidate for treating
cancers involving the CNS, as well as those that have become resistant to traditional taxane therapies. While it has shown promise in
limited clinical trials, further clinical development is necessary to determine its future in neuro-oncology. TPI 287 is an abeotaxane
and is an investigational chemotherapy agent classified as a third-generation taxane derivative. It was developed to address some of the
limitations of earlier taxanes like paclitaxel (Taxol) and docetaxel (Taxotere), particularly issues related to drug resistance and poor
penetration of the BBB. As a synthetic, lipophilic compound, TPI 287 is designed to be brain-penetrant, allowing it to reach CNS tumors
more effectively than its predecessors. Like other taxanes, TPI 287’s mechanism of action is to stabilize microtubules, which disrupts
cell division and induces apoptosis. However, one of its notable advantages is its reduced susceptibility to drug efflux pumps such as
P-glycoprotein (P-gp), a common mechanism by which cancer cells develop resistance to chemotherapy. This feature gives TPI 287 potential
utility in treating drug-resistant cancers in the CNS.
TPI 287 had previously been granted Orphan Drug Designation
by the FDA. ODD from the FDA is available for drugs targeting diseases with less than 200,000 cases per year. ODD may enable market exclusivity
of 7 years from the date of approval of a NDA in the United States. During that period the FDA generally could not approve another product
containing the same drug for the same designated indication. Orphan drug exclusivity will not bar approval of another product under certain
circumstances, including if a subsequent product with the same active ingredient for the same indication is shown to be clinically superior
to the approved product on the basis of greater efficacy or safety, or providing a major contribution to patient care, or if the company
with orphan drug exclusivity is not able to meet market demand. The ODD strengthens our intellectual property protections although the
Company is exploring if there are other patents that could be filed related to TPI 287 to extend additional protections.
Berubicin was discovered at UTMDACC by Dr. Waldemar
Priebe, the founder of the Company. Through a series of transactions, Berubicin was initially licensed to Reata. Reata initiated several
Phase I clinical trials with Berubicin for CNS malignancies, one of which was for malignant gliomas, but subsequently allowed their IND
with the FDA to lapse for strategic reasons. This required us to obtain a new IND for Berubicin before beginning further clinical trials.
On December 17, 2020, we announced that our IND application with the FDA for Berubicin for the treatment of Glioblastoma Multiforme was
in effect. We dosed the first patient in this trial during the third quarter of 2021. Correspondence between the Company and the FDA resulted
in modifications to our initial trial design, including designating overall survival (OS) as the primary endpoint of the study. OS is
a rigorous endpoint that the FDA has recognized as a basis for approval of oncology drugs when a statistically significant improvement
can be shown relative to a randomized control arm.
We do not have manufacturing facilities and all
manufacturing activities are contracted out to third parties. Additionally, we do not have a sales organization.
On November 21, 2017, we entered into a Collaboration
and Asset Purchase Agreement with Reata (the “Reata Agreement”). Pursuant to the Reata Agreement we purchased all of Reata’s
intellectual property and development data regarding Berubicin, including all trade secrets, knowhow, confidential information and other
intellectual property rights.
On December 28, 2017, we obtained the rights to
a worldwide, exclusive royalty-bearing, license to the chemical compound commonly known as Berubicin from HPI in an agreement we refer
to as the HPI License. HPI is affiliated with our founder, Dr. Priebe. Under the HPI License we obtained the exclusive right to develop
certain chemical compounds for use in the treatment of cancer anywhere in the world. In the HPI License we agreed to pay HPI: (i) development
fees of $750,000 over a three-year period beginning November 2019; (ii) a 2% royalty on net sales; (iii) a $50,000 per year license fee;
(iv) milestone payments of $100,000 upon the commencement of a Phase II trial and $1.0 million upon the approval of an NDA for Berubicin;
and (v) 3 shares of our common stock. The patents we licensed from HPI expired in March 2020. On March 23, 2025, the Company terminated
the HPI License.
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On June 10, 2020, the FDA granted Orphan Drug Designation
(“ODD”) for Berubicin for the treatment of malignant gliomas. The ODD now constitutes our primary intellectual property protection
for Berubicin although the Company is exploring if there are other patents that could be filed related to Berubicin to extend additional
protections.
On January 10, 2020, we entered into a Patent and Technology License Agreement
(the “WP1244 Agreement”) with The Board of Regents of The University of Texas System, an agency of the State of Texas, on
behalf of the UTMDACC. Pursuant to the WP1244 Agreement, we obtained a royalty-bearing, worldwide, exclusive license to certain intellectual
property rights, including patent rights, related to our portfolio of WP1244 drug technology. On April 25, 2024, UTMDACC provided notice
to us if its intent to terminate the WP1244 Agreement if we fail to pay the annual maintenance fee of $50,000, as well as $1,300 in expenses.
On May 25, 2024 the WP1244 Agreement was terminated. There are no termination penalty provisions in the Agreement.
On July 24, 2021, the Company received Fast Track
Designation from the FDA for Berubicin. Fast Track Designation is designed to facilitate the development and expedite the review
of drugs to treat serious conditions and fill an unmet medical need
On July 29, 2024, the Company entered into an
Exclusive License Agreement and Stock Purchase Agreement (collectively, the “Cortice Agreements”) with Cortice Biosciences,
Inc. (“Cortice”) pursuant to which Cortice granted the Company an exclusive license to the intellectual property rights related
to certain patents around the compound TPI 287 in the United States, Canada, Mexico and Japan. The term of the license will expire, other
than due to a breach of the Cortice Agreements, at the end of the royalty term with respect to any licensed product in any of the included
territories, which begins upon the first commercial sale in such territory and ends on the latest of (i) ten years after such sale, (ii)
the expiration of regulatory or marketing exclusivity for such licensed product in such country, or (c) the expiration of the last to
expire valid patent claim in such country covering such licensed product.
Our plan of operations is primarily focused on
completing a clinical trial for TPI 287 and finishing the on-going trial of Berubicin. We estimate that we have sufficient capital to
take us into the first quarter of 2026, a period during which we would likely expect to initiate a trial of TPI 287, as well as complete
the Berubicin trial including its final analysis. In addition, we have working capital to fund our operations during this period (with
such operations estimated at $4.5 to $5.0 million per annum). We do not currently have a firm trial design for TPI 287 so estimates of
development cost are not available, however, regardless of trial design, the cost of bringing TPI 287 to regulatory approval for marketing
will require significant additional financing. The timing and costs of clinical trials are difficult to predict and as such the foregoing
estimates may prove to be inaccurate. We have no commitments for such additional needed financing and will likely be required to raise
such financing through the sale of additional equity or debt securities.
Results of Operations for
the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023
General and Administrative Expense
General and administrative expense was approximately
$5,612,000 for the year ended December 31, 2024 compared to approximately $4,770,000 for 2023. The increase in general and administrative
expense was mainly attributable to increase of approximately $756,000 in professional expenses, $440,000 in employee compensation.
These changes were offset by decrease of approximately $104,000 in stock-based compensation, $49,000 in insurance expenses, $21,000 in
travel expenses, board of director compensation of $9,000, advertising and marketing of $119,000 and other general and administrative
expenses of $52,000.
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Research and Development Expense
Research and development expense was approximately
$9,290,000 for the year ended December 31, 2024 compared to approximately $14,096,000 for 2023. The decrease in research and development
expenses during the period was mainly attributed to the timing of research organization (CRO) expenses and patient treatment costs related
to continued progress with our clinical trial for Berubicin. Our CRO expenditures are primarily for labor related to activating selected
trial sites, managing patient enrollment processes, collecting and managing data from patient treatments throughout the trial, processing
reimbursement to the sites for patient treatment, and assisting with necessary submissions to amend the IND. CRO expenditures are expected
to begin to taper off throughout the remainder of the trial as we are no longer activating sites and no longer enrolling patients after
January 2024. We expect our research and development costs to taper off in the near future as we move toward completion of our clinical
trial for Berubicin primarily due to patients moving from active treatment to follow-up leading to decreasing costs of treating and following
these patients as more patients eventually succumb to their disease, then toward year end 2025 we expect costs related to the future trial
of TPI 287 to begin increasing to levels similar to those seen during our trial of Berubicin.
Other Income (Expense)
Interest income was approximately $60,000 and $28,000
for the years ended December 31, 2024 and 2023, respectively. Interest expense was approximately $16,000 and $14,000 for the years ended
December 31, 2024 and 2023, respectively.
Net Loss
The net loss for the year ended December 31, 2024
was approximately $14,858,000 compared to approximately $18,851,000 for 2023. The change in net loss is primarily attributable to increased
research and development costs.
Liquidity and Capital Resources
On December 31, 2024, we had cash of approximately
$6,461,000 and we had a working capital of approximately $6,134,000. We have historically funded our operations from proceeds from debt
and equity sales.
On
February 1, 2024, the Company completed a public offering of (i) 889 shares of common stock; (ii) pre-funded warrants to purchase
4,448 shares of common stock; (iii) Series A Warrants to purchase up to an aggregate of 5,342 shares of common stock ; and (iv) Series
B Warrants to purchase up to an aggregate of 5,342 shares of common stock The net proceeds to the Company from the offering were $3,331,000,
after deducting the placement agents’ fees and other offering expenses.
On June 14, 2024, the Company entered into securities
purchase agreements with institutional investors for the sale by the Company of 6,720 shares of common stock and pre-funded warrants to
purchase 601 shares of common stock in lieu thereof in a registered direct offering. In a concurrent private placement, the Company also
sold to the investors unregistered warrants to purchase up to an aggregate of 7,321 shares of common stock. The gross proceeds to the
Company from the offering was approximately $1.37 million, resulting in net proceeds, after payment of commissions and expenses, received
by the Company of $1,203,267.
On June 26, 2024, the Company entered into securities
purchase agreements with institutional investors for the sale by the Company of 11,360 shares of common stock in a registered direct offering.
In a concurrent private placement, the Company also sold to the investors unregistered warrants to purchase up to an aggregate of 11,360
shares of common stock. The gross proceeds to the Company from the offering were approximately $1.39 million resulting in net proceeds,
after payment of commissions and expenses, received by the Company of $1,221,146.
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On July 3, 2024, the Company entered into securities
purchase agreements with institutional investors for the sale by the Company of 28,500 shares of common stock in a registered direct offering.
In a concurrent private placement, the Company also sold to the investors unregistered warrants to purchase up to an aggregate of 28,500
shares of common stock. The gross proceeds to the Company from the offering were approximately $1.98 million, before deducting the financial
advisor fees and other estimated offering expenses payable by the Company. After payment of commissions and expenses, the proceeds received
by the Company was $1,787,000.
On July 26, 2024, the Company entered into a Sales
Agreement (the “AGP ATM Sales Agreement”) with A.G.P./Alliance Global Partners (“AGP”). Pursuant to the terms
of the AGP ATM Sales Agreement, the Company originally was permitted to sell from time to time through AGP, as sales agent or principal,
shares of the Company’s common stock, par value $0.001 per share with initial aggregate sales price of up to $5.2 million. On July
30, 2024, the Company increased the aggregate sales price of common shares that may be sold under the AGP ATM Sales Agreement to $25.0
million (not including the original $5.2 million). On March 20, 2025, the Company increased the aggregate sales price of common shares
that may be sold under the AGP ATM Sales Agreement to $43.5 million (including $6.4 million remaining from the previous increase). As
of December 31, 2024, the Company has sold 991,773 shares pursuant to the AGP ATM Sales Agreement for net proceeds of approximately $13.7
million. $882,539 of the net proceeds was deposited on January 10, 2025. As of December 31, 2024, the Company recorded a subscription
receivable for $882,539.
On October 23, 2024, the Company entered into securities
purchase agreements with institutional investors for the sale by the Company of 74,000 shares of common stock in a registered direct offering.
In a concurrent private placement, the Company also sold to the investors unregistered warrants to purchase up to an aggregate of 278,943
shares of common stock. The gross proceeds to the Company from the offering were approximately $3 million, before deducting the financial
advisor fees and other estimated offering expenses payable by the Company. After payment of commissions and expenses, the proceeds received
by the Company was $2,725,907.
We estimate that we have sufficient capital to take us into the first quarter
of 2026, a period during which we would likely expect to initiate a trial of TPI 287, as well as complete the Berubicin trial including
its final analysis. In addition, we have working capital to fund our operations during this period (with such operations estimated at
$4.5 to $5.0 million per annum). We do not currently have a firm trial design for TPI 287 so estimates of development cost are not available,
however, regardless of trial design, the cost of bringing TPI 287 to regulatory approval for marketing will require significant additional
financing. The timing and costs of clinical trials are difficult to predict and as such the foregoing estimates may prove to be inaccurate.
We have no commitments for such additional needed financing and will likely be required to raise such financing through the sale of additional
equity or debt securities.
We will need to raise significant
additional capital in the future in order to meet our future obligations and execute our business plan. If we are unable to raise sufficient
funds, we will be required to develop and implement an alternative plan to further extend payables, reduce overhead or scale back our
business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan
will be successful and if it is not successful we may need to cease operations entirely.
Summary of Cash Flows
Cash used in operating activities
Net cash used in operating activities was approximately
$17,113,000 and $14,140,000 for the years ended December 31, 2024 and 2023, respectively, and mainly included payments made for drug development
(including the cost of our trial of Berubicin), contract labor, officer compensation, stock-based compensation, marketing
and professional fees to our consultants, attorneys and accountants.
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Cash used in investing activities
Net cash used in investing activities was approximately
$4,000 and $4,000 for the years ended December 31, 2024 and 2023 and included payments for furniture and equipment.
Cash provided by financing activities
Net cash provided by financing activities was approximately
$23,030,000 and $4,637,000 for the years ended December 31, 2024 and 2023, respectively. We received net proceeds of approximately
$23,376,000 from the issuance of common stock during the year ended December 31, 2024.
Off-balance Sheet Arrangements
As of December 31, 2024, we did not have any relationships
with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities,
established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Purchase Commitments
We do not have any material commitments for capital
expenditures, although we are required to pay certain milestone fees and royalties to Reata and Cortice as described in the section “Overview”
above.
JOBS Act Accounting Election
The Jumpstart Our Business Startups Act of 2012,
or the JOBS Act, exempts an “emerging growth company” such as us from being required to comply with new or revised financial
accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act
provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such election to opt out is irrevocable. We elected not to opt out of such extended transition period which means
that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth
company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison
of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which
has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards
used.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates, assumptions and judgments
that affect the amounts reported in the financial statements, including the notes thereto. We consider critical accounting policies to
be those that require more significant judgments and estimates in the preparation of our financial statements. Management relies on historical
experience and other assumptions believed to be reasonable in making its judgment and estimates. Actual results could differ materially
from those estimates.
Management believes its application of accounting
policies, and the estimates inherently required therein, are reasonable. These accounting policies and estimates are periodically reevaluated,
and adjustments are made when facts and circumstances dictate a change. As of December 31, 2024, there was no critical audit estimates.
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Item 7A.
Quantitative and Qualitative Disclosure About Market Risk.
We are a smaller reporting company as defined by
Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.