What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-03-18 compared with 2021-03-17 · 161 added, 128 removed, 254 unchanged (53% of the section changed)

Investing in our common stock involves a high degree of risk.

Set forth below are certain material risks and uncertainties known to us that could adversely effect our business, financial condition, or results of operations or could cause our actual results to differ materially from our expectations expressed elsewhere in this Annual Report.

Set forth below are certain material risks and uncertainties known to us that could adversely affect our business, financial condition, or results of operations or could cause our actual results to differ materially from our expectations expressed elsewhere in this Annual Report.

The occurrence of the events contemplated by one or more of the factors we describe below could cause the market price of our common stock to decline, resulting in the loss of all or part of any investment in our common stock.

Furthermore, other risks that are currently unknown to us or that we currently believe to be immaterial may also, nevertheless, adversely effect our business, financial condition, or results of operations in a way that is material.

Before investing in our common stock, you should carefully consider these risks and uncertainties, together with all other information in this Annual Report, including our consolidated financial statements and related notes, the information included in Part II — Item 7 — Management ’ s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report, and the information incorporated herein by reference.

Furthermore, other risks that are currently unknown to us or that we currently believe to be immaterial may also, nevertheless, adversely affect our business, financial condition, or results of operations in a way that is material.

Item 7 —

Management ’

s Discussion and Analysis of Financial Condition and Results of Operations, and the information incorporated herein by reference.

Risks Related to the Development, Regulatory Approval, and Commercialization of TSC and Our Other Product Candidates

1 unchanged sentence

However, the drug development process is expensive, time-consuming and uncertain.

Our efforts to develop, obtain regulatory approval for, and commercialize TSC or any other product candidate could fail at any stage of the development process for a variety of reasons, including the possibility that TSC fails to adequately demonstrate efficacy or proof of concept in the TSC Oxygenation Trials.

Furthermore, because the results of preclinical studies and early-stage clinical trials are not necessarily predictive of future results, even if we are able to advance TSC or another product candidate into additional clinical trials – for example, our Planned Phase 2 Hypoxia-related Indication Trial we intend to commence assuming success in the TSC Oxygenation Trials – we may not continue to experience favorable results.

for example, beyond our Planned Phase 2 Hypoxic Solid Tumor Trial –

we may not continue to experience favorable results.

The success of Diffusion, including our ability to finance our operations and generate revenue in the future, will depend primarily on the successful development, regulatory approval, and, ultimately, commercialization of our product candidates.

Currently, the majority of our product development resources are dedicated to our lead product candidate, TSC.

We are also in early-stage development of our second product candidate, DFN-529, and, in the future, we may also seek to develop or commercialize additional product candidates, including product candidates that we may in-license or acquire to supplement our internally developed portfolio.

In the future, we may also seek to develop or commercialize additional product candidates, including product candidates that we may in-license or acquire to supplement our internally developed portfolio.

The drug development process is very expensive, time-consuming, difficult to design and implement, and its outcome is inherently uncertain.

3 unchanged sentences

We do not know whether the clinical trials we may conduct will demonstrate adequate efficacy and safety or otherwise provide adequate information to result in regulatory approval to market any of our product candidates in any particular jurisdiction.

Furthermore, the timeline for our clinical trials may be delayed in the future for a variety of reason, including delays related to regulatory and IRB review and approval, slower than anticipated rates of enrollment in or early withdrawals from the trial, third party performance issues beyond our control including any CRO engaged in the conduct of the trial, discovery of series or unexpected toxicities or side effects, or a lack of effectiveness.

Furthermore, the timeline for our clinical trials may be delayed in the future for a variety of reasons, including delays related to regulatory and IRB review and approval, slower than anticipated rates of enrollment in or early withdrawals from the trial, third party performance issues beyond our control including any CRO engaged in the conduct of the trial, discovery of series or unexpected toxicities or side effects, or a lack of effectiveness.

Whether we are able to successfully develop TSC or any of our other product candidates will depend on a large number of factors, including the following:

our ability to complete our planned and future clinical trials in a timely manner and, with respect to any future trials beyond the TSC Oxygenation Trials and our Planned Phase 2 Hypoxia-related Indication Trial we intend to commence assuming success in the TSC Oxygenation Trials, our ability to fund them;

our ability to complete our planned and future clinical trials in a timely manner and, with respect to any future trials beyond the ongoing Oxygenation Trials and our Planned Phase 2 Hypoxic Solid Tumor Trial, our ability to fund such trials;

our ability to demonstrate safety and efficacy to the satisfaction of the FDA and similar foreign regulatory authorities, and whether we are required by any such body to conduct additional clinical trials to support approval;

6 unchanged sentences

At any time, we may decide or be forced by circumstance to delay or discontinue the development or commercialization of TSC or any of our other product candidates, including as a result of unfavorable results in later-stage clinical trials, changes in our internal product, technology or indication focus, the appearance of new technologies that make our product candidate obsolete, competition from a competing product, or changes in (or failure to comply with) applicable regulatory requirements.

If we decide or are forced to terminate the TSC development program or any future program in which we have invested significant resources, we will not receive any return on our investment despite the allocation of significant resources, we may not be able to execute on our business plan effectively, and our business, financial condition, or results of operations may be materially and adversely effected.

If we decide or are forced to terminate the TSC development program or any future program in which we have invested significant resources, we will not receive any return on our investment despite the allocation of significant resources, we may not be able to execute on our business plan effectively, and our business, financial condition, results of operations may be materially and adversely affected.

Even if we are able to successfully complete the clinical trials and over development activities necessary to submit an NDA to the FDA or an application for marketing approval to an equivalent non-U.S.

regulatory authority, we may be unable to obtain regulatory approval for TSC, DFN-529, or any other product candidates we may attempt to develop in future, for the indications for which we initially seek approval or at all.

regulatory authority, we may be unable to obtain regulatory approval for TSC or any other product candidates we may attempt to develop in future, for the indications for which we initially seek approval or at all.

The FDA and similar non-U.S.

regulatory authorities have significant discretion in the approval process, including the ability to delay, limit, or deny approval of product candidates.

The delay, limitation, or denial of regulatory approval for any of our product candidates, and TSC in particular, would limit or restrict altogether our ability to commercialize the product and generate revenue, which could materially and adversely impact our business, financial condition, or results of operations.

We currently have no products approved for sale, and we may never obtain regulatory approval to commercialize TSC, DFN-529, or any other product candidates we may attempt to develop in the future.

We currently have no products approved for sale, and we may never obtain regulatory approval to commercialize TSC or any other product candidates we may attempt to develop in the future.

The research, testing, manufacturing, safety surveillance, efficacy, quality control, recordkeeping, labeling, packaging, storage, approval, sale, marketing, distribution, import, export, and reporting of safety and other post-market information related to drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and abroad, which often differ from country to country.

18 unchanged sentences

The FDA or applicable foreign regulatory agencies may ask us to conduct additional costly and time-consuming clinical trials in order to obtain marketing approval or approval to enter into a further phase of clinical development, or may change the requirements for approval even after such agency has reviewed and commented on the design for the clinical trials.

Any delay in obtaining, or inability to obtain, the regulatory approvals necessary to market and sell our product candidates would delay or prevent commercialization and would materially and adversely effect our business, financial condition, or result of operations.

Any delay in obtaining, or inability to obtain, the regulatory approvals necessary to market and sell our product candidates would delay or prevent commercialization and would materially and adversely affect our business, financial condition, and result of operations.

Furthermore, if we determine in the future that the development, approval, or commercial prospects of any product candidate are insufficient to justify our continued expenditure of the associated development and other costs, we may choose to delay, suspend, or abandon our development or commercialization efforts with respect thereto, which would reduce or eliminate our potential return on investment for those product candidates.

10 unchanged sentences

Any disruption in our relationship with these third parties or their ability to manufacture the APIs and finished drug product we need for our clinical trials and other development activities could result in significant delays in our anticipated development timelines and/or significant additional supply costs.

Such a disruption could be the result of any number of reasons, including contractual disputes with our partners, regulatory issues at our partner or at their facilities (whether or not related to Diffusion or our drug product), financial issues faced by our partners (including bankruptcy or insolvency), damages to our partners facility or equipment, communication breakdowns, or acts of God.

For example, we are currently facing certain delays in the manufacturing process for planned, new batches of TSC drug product due to the fact that, in connection with the U.S.

federal government’s Operation Warp Speed initiative in response to the COVID-19 pandemic, the facility at which our primary CMO partner conducts significant portions of the TSC manufacturing process has been mandated to devote the majority of the facility’s available resources to the manufacture of components of the COVID-19 vaccine.

If our CMO is unable to manufacture sufficient quantities of drug supply to meet our needs in a timely fashion or in accordance with the specifications contracted for, we may be forced to delay our development plans for TSC, find alternative suppliers, or pursue other available remedies, which could result in additional costs and the diversion of management’s time.

Amplifying this risk is the fact that we currently depend upon a sole source for manufacture of API for TSC and other aspects of our manufacturing process, limiting our available options to troubleshoot these issues.

Although we are currently in the process of identifying and developing alternative manufacturing and supply alternatives, this process remains ongoing, will take time, and will involve significant costs.

Furthermore, due to the significant regulatory oversight of the pharmaceutical manufacturing process, any changes in the identity of our third-party partners or in our manufacturing processes – even if in the best interests of the Company and successful – could result in regulatory and other delays, as well as significant additional costs.

Such a disruption could be the result of any number of reasons, including contractual disputes with our partners, regulatory issues with our partners or at their facilities (whether or not related to Diffusion or our drug product), financial issues faced by our partners (including bankruptcy or insolvency), damages to our partners’

facilities or equipment, communication breakdowns, or acts of God.

For example, during 2021 we faced certain delays in the manufacturing process for planned, new batches of TSC drug product due to the fact that, in connection with the U.S.

federal government’s Operation Warp Speed initiative in response to the COVID-19 pandemic, the facility at which our former, primary CMO partner conducts significant portions of the TSC manufacturing process had been mandated to devote the majority of the facility’s available resources to the manufacture of components of the COVID-19 vaccine.

Amplifying this risk is the fact that, notwithstanding the improvements made to our supply chain during 2021 described under, " Business - Product Development - Chemistry, Manufacturing, and Controls," we currently depend upon a sole source to manufacture our API for TSC and other aspects of our manufacturing process, limiting our available options to troubleshoot these issues.

Although we actively manage this third-party relationship to ensure continuity, quality, and compliance with regulations and we intend to identify and develop alternative manufacturing and supply alternatives in the future, this process remains ongoing, will take time, and will involve significant costs.

Even with these efforts, some events beyond our control, including global instability due to political unrest or from an outbreak of pandemic or contagious disease, such as COVID-19, could result in supply chain disruptions or the complete or partial failure of these manufacturing services.

Any such failure or disruptions could materially adversely affect our business, financial condition, cash flows, and results of operations.

Furthermore, due to the significant regulatory oversight of the pharmaceutical manufacturing process, any changes in the identity of our third-party partners or in our manufacturing processes –

even if in the best interests of the Company and successful –

could result in regulatory and other delays, as well as significant additional costs.

In addition, if our current supplier terminated our arrangement or failed to meet our supply needs for any reason prior to the time we are able to identify sufficient alternative manufacturing capacity, we may be forced to delay our development plans significantly.

Our CMO and other manufacturing and supply partners are also engaged to supply and manufacture materials or products for other biopharmaceutical and pharmaceutical companies, exposing them to regulatory risks unrelated to the work they are doing for Diffusion but which may nevertheless impact their ability to meet their contractual requirements to us or otherwise impede their ability to supply us with sufficient quantities of drug product.

Failure to meet the regulatory requirements for the production of those materials and products may also affect the regulatory clearance of a contract supplier’s or manufacturer’s facility.

If the FDA or a comparable foreign regulatory agency does not approve these facilities for the supply or manufacture of our product candidates or if it withdraws its approval in the future, even if such lack of approval is unrelated to Diffusion or our product candidates, we may need to find alternative supply or manufacturing facilities.

In addition, to date we have only manufactured TSC and our other product candidates in relatively small quantities for preclinical studies and clinical trials.

As we prepare for additional, later-stage clinical trials and potential commercialization, we will need to take steps to substantially increase the scale at which we are able to product TSC, its API, and its other component parts.

In order to meet these needs, our CMOs and suppliers will need to be able to produce our API, other components, and finished product in larger quantities, more cost effectively and, in certain cases, at higher yields than they currently achieve.

In order to meet these needs, our CMOs and suppliers will need to produce our API, other components, and finished product in larger quantities, more cost effectively and, in certain cases, at higher yields than they currently achieve.

These third-party contractors may not be able to successfully increase the manufacturing capacity for any of such drug substance and product candidates in a timely or cost-effective manner or at all.

3 unchanged sentences

In addition, the manufacturing facilities of certain of our suppliers are located outside of the United States.

This may give rise to difficulties in importing our products or product candidates or their components into the United States or other countries as a result of, among other things, regulatory agency approval requirements or import inspections, incomplete or inaccurate import documentation or defective packaging.

Any of these factors could cause a delay or termination of preclinical studies, clinical trials, other development activities, regulatory submissions or approvals of our product candidates, or, if approved, commercial supply, and could result in significant, unanticipated costs or an ability to effectively develop our products candidates or commercialize our approved products on a timely basis, or at all, which could materially and adversely effect our business, financial condition, or results of operations.

This may give rise to difficulties in importing our product candidates or their components into the United States or other countries as a result of, among other things, regulatory agency approval requirements or import inspections, incomplete or inaccurate import documentation or defective packaging.

Any of these factors could cause a delay or termination of preclinical studies, clinical trials, other development activities, regulatory submissions or approvals of our product candidates, or, if any of our product candidates is approved, commercial supply, and could result in significant, unanticipated costs or an inability to effectively develop our products candidates or commercialize our approved products on a timely basis, or at all, which could materially and adversely affect our business, financial condition, and results of operations.

We expect to rely on third-party CROs and other third parties to conduct and oversee our clinical trials and other aspects of our development process for TSC and our other product candidates.

2 unchanged sentences

Conducting our clinical trials in a safe, compliant, and timely manner is critical to our success.

We currently rely on third-party CROs to conduct and oversee our clinical trials and other aspects of our product development, as well as various medical institutions, clinical investigators, contract laboratories, consultants, and other third parties to design and conduct our trials, to analyze the results therefrom, and to ensure that the trials are conducted in accordance with our clinical protocols and all applicable regulatory requirements, including the FDA’s regulations and GCPs.

These CROs and other third parties play a significant role in the conduct of these trials and the subsequent collection and analysis of data therefrom, as we control only certain aspects of their activities and rely heavily on them to execute our trials in a safe, compliant, and timely manner.

3 unchanged sentences

We, as well as the CROs and other third-party contractors acting on our behalf, are required to comply with GCP and GLP requirements in all of our clinical trials, which are enforced through periodic inspections of trial sponsors, principal investigators, and trial sites.

If we or any of these third parties fail to comply with applicable GCP, GLP, or other regulatory requirements, the clinical data generated in our clinical trials may be deemed unreliable and we may be required to perform additional clinical trials to supplement or replace such data before receiving approval of a product candidate from the FDA or a non-U.S.

regulatory authority.

Our clinical trials must also generally be conducted with product produced under cGMP regulations.

Our and our partners’ compliance with these various regulations may be reviewed by regulatory inspections at any time, processes over which we will have very little control or immediate visibility, and a failure to comply with these regulations and policies by us, our CROs, or any of our other third party partners may result in significant delays in our development programs.

Our and our partners’

compliance with these various regulations may be reviewed by regulatory inspections at any time, processes over which we will have very little control or immediate visibility, and a failure to comply with these regulations and policies by us, our CROs, or any of our other third party partners may result in significant delays in our development programs.

In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and could receive cash or equity compensation in connection with such services.

1 unchanged sentence

In addition, in order to fund or otherwise further development of our current or future product candidates, we may collaborate with other pharmaceutical and biotechnology companies on their development and potential commercialization of those product candidates.

We would face significant competition in seeking appropriate partners and whether we reach a definitive agreement for a collaboration will depend on many factors, including, our assessment of the partner’s resources and experience, the terms and conditions of the proposed collaboration, the likelihood of approval by the FDA or other regulatory authorities;

We would face significant competition in seeking appropriate partners and whether we reach a definitive agreement for a collaboration will depend on many factors, including, our assessment of a partner’s resources and experience, the terms and conditions of the proposed collaboration, the likelihood of approval by the FDA or other regulatory authorities;

the potential market for the subject product candidate;

2 unchanged sentences

These types of collaborations are complex and time-consuming to negotiate and document and could ultimately result in lower returns on investment for our stockholders than would have been achieved developing the product candidate without a partner.

Further, if we were to breach our obligations under the agreements governing any such future collaboration, we may face substantial consequences, including potential termination of the collaboration, and our rights to our partners’ product candidates, in which we have invested substantial time and money, would be lost.

Any failure to successfully enter into and maintain the necessary relationships with CROs and our other current and future third party partners and collaborators could materially and adversely effect our business, financial condition, or results of operations.

product candidates, in which we have invested substantial time and money, would be lost.

Any failure to successfully enter into and maintain the necessary relationships with CROs and our other current and future third party partners and collaborators could materially and adversely affect our business, financial condition, and results of operations.

General Risks Related to the Development, Regulatory Approval, and Commercialization of TSC and Our Other Product Candidates

Our business, financial condition, or results of operations may also be materially adversely effected by a number of general risks related to the development and regulatory approval of our product candidates that are not specific to our Company, including:

• Our TSC COVID Trial, which we completed in February 2021, was conducted at the NIID in Bucharest, Romania and we may in the future conduct additional clinical trials for TSC or our other product candidates outside the U.S.

Our business, financial condition, or results of operations may also be materially adversely affected by a number of general risks related to the development and regulatory approval of our product candidates that are not specific to our Company, including:

•    Our COVID Trial, which we completed in February 2021, was conducted in Bucharest, Romania and we may in the future conduct additional clinical trials for TSC or our other product candidates outside the U.S.

In connection with an application for marketing approval, the FDA may determine not to accept data from clinical trials conducted outside of the U.S.

2 unchanged sentences

medical practice, or as a result of certain other factors.

There can be no assurance that the FDA will accept any data we obtain from the TSC COVID Trial or other trials we may conduct outside the U.S.

There can be no assurance that the FDA will accept any data we obtain from the COVID Trial or other trials we may conduct outside the U.S.

in the future.

• We face a number of risks related to the potential for one or more of our product candidates to cause undesirable side effects, have other unexpected properties, contain manufacturing defects, or be subject to misuse or abuse.

•    We face a number of risks related to the potential for one or more of our future product candidates to cause undesirable side effects, have other unexpected properties, contain manufacturing defects, or be subject to misuse or abuse.

The occurrence of one or more of these events with respect to a product candidate or product could delay or prevent its regulatory approval, limit its commercial potential, result in additional pre- or post-approval regulatory requirements, or subject us to product liability exposure to consumers, health care providers, or others.

Product liability claims could be brought in the future even if a product is approved for commercial sale and manufactured in facilities licensed and regulated by the appropriate governmental authorities, and if product liability claims brought against us in the future were to be successful, we could incur substantial liability if our insurance coverage for those claims proved to be inadequate.

• Our employees, independent contractors, principal investigators, consultants, vendors, CROs, and other third parties we work with in the course of our development activities may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, during the course of their employment or other engagement with us.

Product liability claims could be brought in the future even if a product candidate is ultimately approved for commercial sale and manufactured in facilities licensed and regulated by the appropriate governmental authorities, and if product liability claims brought against us in the future were to be successful, we could incur substantial liability if our insurance coverage for those claims proved to be inadequate.

•    Our employees, independent contractors, principal investigators, consultants, vendors, CROs, and other third parties we work with in the course of our development activities may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, during the course of their employment or other engagement with us.

Any such misconduct or improper activities, whether intentional or negligent, could result in regulatory sanctions or other penalties against the Company, exclusion from federal healthcare programs such as Medicare and Medicaid, the incurrence of substantial defense costs, and serious harm to our reputation.

In addition, although we currently have no marketed products, in the event TSC or any of our other product candidates are approved for marketing and commercial sale by the FDA or any other regulatory authority, our business, financial condition, or results of operations may be materially adversely effected by a number of general risks related to the commercialization of such products that are not specific to our Company, including:

• Even if our product candidates obtain regulatory approval, they may fail to achieve the broad degree of physician and patient adoption and use necessary for commercial success.

In addition, although we currently have no marketed products, in the event TSC or any of our other product candidates are approved for marketing and commercial sale by the FDA or any other regulatory authority, our business, financial condition, or results of operations may be materially adversely affected by a number of general risks related to the commercialization of such products that are not specific to our Company, including:

•    Even if our product candidates obtain regulatory approval, they may fail to achieve the broad degree of physician and patient adoption and use necessary for commercial success.

The degree and rate of physician and patient adoption will depend on a number of factors, including the clinical indications for which a product candidate is approved and its effectiveness compared to other therapies, cost and the availability of reimbursement and other coverage from third party payors, our ability to educate patients and healthcare providers regarding a new therapy, and the effectiveness of our sales and marketing efforts.

Furthermore, we will face significant competition, often from products sold and marketed by companies with far greater resources than Diffusion, and our failure to effectively compete may prevent us from achieving significant market penetration.

• With respect to any such future products available only by prescription, if we are unable to achieve and maintain coverage and adequate levels of reimbursement from third party payors – including governmental health programs such as Medicare and Medicaid and private insurance companies – and access to such third party payors’ drug formularies, the commercial success of those products may be severely hindered.

•    With respect to any such future products available only by prescription, if we are unable to achieve and maintain coverage and adequate levels of reimbursement from third party payors –

including governmental health programs such as Medicare and Medicaid and private insurance companies –

and access to such third party payors’

drug formularies, the commercial success of those products may be severely hindered.

If any such products do not demonstrate attractive efficacy profiles, they may not qualify for coverage and reimbursement and, even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate, may require co-payments that patients find unacceptably high, and may vary from payor to payor, and there is no assurance that coverage and reimbursement levels necessary to achieve commercial success will be obtained.

• Any such future products candidates that we commercialize will be subject to ongoing and continued regulatory review, including rules and regulations of the FDA and similar non-U.S.

•    Any such future products candidates that we commercialize will be subject to ongoing and continued regulatory review, including rules and regulations of the FDA and similar non-U.S.

governmental authorities relating to advertising, marketing and labeling (including restrictions on the promotion of off-label use), potential REMS requirements, routine manufacturing and other review, and required compliance with GLP.

If we or a regulatory agency discovers previously unknown problems with any such product, or any facility at or process by which it is manufactured, we may face restrictions on the sale or distribution of such product or on our Company as a whole, including regulatory actions requiring us to modify marketing or sales materials, suspend manufacturing or ongoing trials, initiate a recall or withdrawal the product from the market entirely, enter into a consent decree, or submit to other civil or criminal investigations and penalties.

If we or a regulatory agency discovers previously unknown problems with any such product, or any facility at or process by which it is manufactured, we may face restrictions on the sale or distribution of such product or on our Company as a whole, including regulatory actions requiring us to modify marketing or sales materials, suspend manufacturing or ongoing trials, initiate a recall or withdraw the product from the market entirely, enter into a consent decree, or submit to other civil or criminal investigations and penalties.

If we are not able to achieve and maintain regulatory compliance, we may not be permitted to market our product candidates, which would adversely affect our ability to generate revenue and achieve or maintain profitability.

• The biopharmaceutical and pharmaceutical industries are highly regulated and the potential for future legislative reform provides uncertainty and potential threats to our business and our potential future revenue and profitability of any such future products.

In the U.S., there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system intended to contain or reduce the costs of medical products and medical services including those described in Part I – Item 1.

Business – Certain Other Legislation and Regulations – Current Healthcare Laws and Regulations of this Annual Report.

•    The biopharmaceutical and pharmaceutical industries are highly regulated and the potential for future legislative reform provides uncertainty and potential threats to our business and our potential future revenue and profitability of any such future products.

Business –

Certain Other Legislation and Regulations –

Current Healthcare Laws and Regulations .

Additional state and federal healthcare reform measures may be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products once approved or additional pricing pressures.

2 unchanged sentences

Risks Related to Our Intellectual Property

Since the founding of Diffusion LLC in 2001, we have been principally focused on the development of TSC for the treatment of hypoxia and as a platform to enhance standard-of-care treatment for conditions complicated by hypoxia.

Many of our issued patents were issued early in our Company ’ s history.

While we are regularly engaged in further research and development activities with respect to TSC and our other product candidates that may result in novel developments and findings that ultimately lead to further intellectual property opportunities, if the terms of any of our key patents expire before or soon after our therapeutic candidates are approved, or if manufacturers of biosimilar drugs successfully challenge our patents, our business, financial condition, or results of operations may be materially adversely effected.

Patents have a limited duration.

In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest non-provisional filing date in the U.S.

Various extensions may be available, including under the Hatch-Waxman Amendments as described elsewhere in this Annual Report, but the life of a patent, and the protection it affords, is limited.

Even if patents covering TSC and our product candidates, including with respect to their manufacture or use, are obtained, once the patent life has expired, we may be open to additional competition from competitive medications, including biosimilar medications.

In the case of Diffusion, the normal lives (in other words, prior to the application of any patent term restoration of marketing exclusivity periods that may be available) of our issued U.S.

patents related to TSC begin to expire in 2023, which may be prior to the time that we are able to obtain regulatory approval for and, if approved, commercialize TSC.

Even if patent term extension or other protections such as marketing exclusivity are available upon the regulatory approval (if any) of TSC or any of our other product candidates, the benefits provided by these regulatory and legislative mechanisms is limited and typically less robust than full patent protection.

For example, the five-year extension of patent life potentially available under the Hatch-Waxman Amendments cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and only one patent applicable to an approved drug may be extended.

Receiving such an extension is also subject to compliance with applicable deadlines for application and certain other regulatory requirements.

Moreover, the length of the extension could be less than we request.

If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner than we expect.

Also, the scope of our right to exclude during any patent term extension period may be limited or may not cover a competitor’s product or product use.

Given the amount of time required for the development, testing, and regulatory review of new drug candidates, patents protecting any drug candidate might expire before or shortly after such drug candidate is approved or commercialized.

Similarly, our patents and patent applications may not provide us with sufficient time or rights to commercialize our product candidates or exclude others from commercializing products similar ours.

If our patent protections for our product candidates have expired, this could include manufacturers of identical, biosimilar drugs.

If we are unable to obtain new, patent claims with respect to our existing product candidates and other technologies, in particular those related to our lead product candidate TSC, that both adequately protect our intellectual property position for commercial purposes and extend the term of overall protection as compared to our existing issued patents, we may be reliant on these types of patent term extensions and similar exceptions for such protection during the ultimate commercialization of TSC.

This limited protection could have a material and adverse effect on our business, financial condition, or results of operations.

We may not be able to obtain or enforce patent rights or other intellectual property rights that cover our product candidates and technologies that are of sufficient breadth to prevent third parties from competing against us.

2 unchanged sentences

Accordingly, our ability to obtain and maintain patent protection in both the U.S.

jurisdictions will be critical to ability to successfully develop, obtain regulatory approval for, and, in particular, commercialize TSC and our other product candidates.

jurisdictions will be critical to our ability to successfully develop, obtain regulatory approval for, and, in particular, commercialize TSC and our other product candidates.

These protections are and will be essential to preserving and protecting our novel inventions, proprietary developments, and trade secrets and to preventing third parties from infringing upon them.

4 unchanged sentences

patents related to composition of matter, formulation, methods of delivery, and methods of use and the scope of coverage vary from country to country.

Although we believe that our intellectual property position is strong and are currently assessing our operations and existing portfolio for additional intellectual property opportunities, we do not have – and may be unable to obtain – patent protection for every aspect of our technology.

and may be unable to obtain –

patent protection for every aspect of our technology.

For aspects of our technology for which we do not have patent coverage, or in countries where we do not have granted patents, we may not have any ability to prevent the unauthorized use of our technologies or technologies substantially similar to ours, and any patents that we may obtain in the future may be narrow in scope and thus easily circumvented by competitors.

3 unchanged sentences

It is also possible that we will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them.

While we are currently engaged in efforts to obtain additional intellectual property and patent protections for TSC, there is no assurance we will obtain such protections through our applications.

Therefore, these and any of our patents and applications may not be prosecuted and enforced in an optimal manner.

7 unchanged sentences

If the breadth or strength of protection provided by the patents we hold or pursue with respect to our product candidates is challenged, it could dissuade companies from collaborating with us to develop, or threaten our ability to commercialize, our product candidates.

Changes in either the patent laws or in the interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property.

Changes in either the patent laws or in the interpretations of patent laws in the U.S.

and other countries may diminish the value of our intellectual property.

In addition, patents have a limited lifespan, presenting further challenges in effectively protecting our technologies and associated commercial position.

In the U.S., the natural expiration of a patent is generally 20 years after it is filed.

Various extensions may be available under a variety of legislative and regulatory avenues but often the life afforded by these extensions and the protections they afford are often limited relative to full patent protection.

Various extensions may be available under a variety of legislative and regulatory avenues but often the life afforded by these extensions and the protections they afford are limited relative to full patent protection.

The extensive period of time between patent filing and regulatory approval for a product candidate limits the time during which we can market a product candidate under patent protection, which may particularly affect the profitability of our early-stage product candidates.

In particular, we have been developing TSC since the founding of Diffusion LLC in the early 2000s and, as a result, portions of our patent portfolio, including certain patents related to TSC’s composition of matter, will expire beginning in 2023.

If the other issued patents in our portfolio currently or that may issue in the future are not adequate to protect our technologies, our competitive position may be harmed and we may face generic or other competition sooner than we otherwise would.

Even if patents covering our products are obtained, once the patent life has expired, we may be open to competition from competitive products.

If one of our products requires extended development, testing and/or regulatory review, patents protecting such products might expire before or shortly after such products are commercialized.

As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours, which could have a material adverse effect on our business, financial condition and results of operations.

To this point, we have been developing TSC since the founding of Diffusion LLC in the early 2000s and, as a result, portions of our patent portfolio, including certain patents related to TSC’s composition of matter, will expire beginning in 2023, which may be prior to the time that we are able to obtain regulatory approval for and, if approved, commercialize TSC.

Moreover, the normal life (i.e., with no adjustments or extensions) of our key issued patents related to the composition of matter of TSC extends to 2026, with potential patent term extensions to 2031, and the normal life of our patents related to an oral formulation of TSC extends to 2031, with potential patent term extensions to 2036.

While the Company is actively engaged in efforts to obtain additional patent protection covering our product candidates, there is no assurance that we will successfully obtain such patent protection..

As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

For example, we are aware of other companies that currently use different formulations of TSC, which could adversely affect the Company.

Furthermore, the laws of some foreign jurisdictions do not provide intellectual property rights to the same extent as in the United States and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions.

9 unchanged sentences

may be less willing to protect trade secret information.

If we are unable to adequately obtain or enforce our patent and other intellectual property rights for any reason, it could materially and adversely effect our business, financial condition, or results of operations.

For more information about our intellectual property and our competition, see the information included in Part I – Item 1.

Business – Products, Product Development, and Our Competition of this Annual Report .

If we are unable to adequately obtain or enforce our patent and other intellectual property rights for any reason, it could materially and adversely affect our business, financial condition, and results of operations.

For more information about our intellectual property and our competition, see the information included under the heading, “Part I –

Business –

Products, Product Development, and Our Competition –

Our Intellectual Property”

and “—

Our Competition.”

If we become involved in lawsuits to protect or enforce our patents or other intellectual property, or if we are sued for infringing intellectual property rights of third parties, it will be costly and time-consuming, and an unfavorable outcome in that litigation could have a material adverse effect on our business, financial condition, or results of operations.

9 unchanged sentences

governmental authority or under Paragraph IV of the Hatch-Waxman Amendments.

For more information regarding the Hatch-Waxman Amendments and Paragraph IV thereunder, see the information in Part I – Item 1.

Business – Government Regulation – The Hatch-Waxman Amendments of this Annual Report.

For more information regarding the Hatch-Waxman Amendments and Paragraph IV thereunder, see the information included under the heading, “

Part I –

Business –

Government Regulation –

The Hatch-Waxman Amendments .”

As of the date of this Annual Report, no litigation asserting infringement claims has been brought against us, nor have we filed such a claim against any third party.

3 unchanged sentences

We may be required to file infringement claims to stop third-party infringement or unauthorized use or, if a third party claims we are infringing on their rights, respond to such claims.

This process can be expensive and time consuming, and could result in a court deciding that a patent of ours is not valid or is unenforceable, that a third party is not required to stop using a technology we believe infringe on our rights, significant costs, or the diversion of management’s time.

This process can be expensive and time consuming, and could result in a court deciding that a patent of ours is not valid or is unenforceable, that a third party is not required to stop using a technology we believe infringes on our rights, significant costs, or the diversion of management’s time.

An adverse determination in any litigation or other proceedings could put one or more of our patents at risk of being invalidated, interpreted narrowly, or amended such that they do not cover our product candidates in a manner sufficient to support our development and commercialization needs or that such product candidate needs to be significantly redesigned, or put our pending patent applications at risk of not issuing, or issuing with limited and potentially inadequate scope.

2 unchanged sentences

Litigation or USPTO proceedings brought by us may fail or may be invoked against us by third parties.

Even if we are successful in these proceedings, domestic or foreign litigation or USPTO or foreign patent office proceedings may result in substantial costs and the diversion of management’s time.

We may not be able to prevent all misappropriation of our proprietary rights, particularly in countries with a legal framework that offers limited intellectual property protections or where the costs of enforcement outweigh the commercial and other benefits of maintaining intellectual property protections.

1 unchanged sentence

This type of disclosure could put us at a significant competitive disadvantage by disclosing important trade secrets or other proprietary information to our competitors and other third parties.

Any litigation or other challenge related to our intellectual property could materially and adversely effect our business, financial condition, or results of operations.

Any litigation or other challenge related to our intellectual property could materially and adversely affect our business, financial condition, and results of operations.

General Risks Related to Our Intellectual Property

Our business, financial condition, or results of operations may also be materially adversely effected by a number of general risks related to our intellectual property that are not specific to our Company, including:

• As is common in the biopharmaceutical and pharmaceutical industries, some of our employees were formerly employed by companies in the industry, including our competitors or potential competitors, and some of our consultants actively work for other companies in the industry.

Our business, financial condition, or results of operations may also be materially adversely affected by a number of general risks related to our intellectual property that are not specific to our Company, including:

•    As is common in the biopharmaceutical and pharmaceutical industries, some of our employees were formerly employed by companies in the industry, including our competitors or potential competitors, and some of our consultants actively work for other companies in the industry.

As a result, although we have in place policies which prohibit the use of third-party confidential information in violation of any obligation to a former employer or otherwise, we may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed to us alleged trade secrets of their former employers or their former or current customers.

1 unchanged sentence

Any of the foregoing events could result in significant costs and the diversion of time and resources.

• Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated as a result of any non-compliance with these requirements.

•    Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated as a result of any non-compliance with these requirements.

We may also abandon certain intellectual property protections that we would otherwise maintain if we determine such protections are not expected to provide sufficient value relative to the cost of ongoing maintenance.

• Patent laws and other intellectual property protections available in the U.S., E.U., or other jurisdictions are subject to change.

•    Patent laws and other intellectual property protections available in the U.S., E.U., or other jurisdictions are subject to change.

These changes may be unpredictable, weaken our overall intellectual property position, increase our costs related to maintenance and enforcement, or otherwise diminish the value of patents in general, thereby impairing our ability to protect our product candidates and maximize our return on investment thereon.

2 unchanged sentences

If we fail to obtain necessary financing, we may be forced to delay or curtail our clinical trials and other development activities or be unable to complete the development and commercialization of our product candidates due to a lack of sufficient resources.

Although we expect that our existing cash resources will enable us to fund our operating expenses and capital expenditure requirements, including expected costs related to the planned TSC Oxygenation Trials and our Planned Phase 2 Hypoxia-related Indication Trial, through 2023, we expect to continue to spend substantial amounts as we continue to develop TSC and our other product candidates, we will need to obtain additional financing in the future in order to complete the development of TSC and fund our other development and operational activities.

Although we expect that our existing cash resources will enable us to fund our operating expenses and capital expenditure requirements through 2023, we expect to continue to spend substantial amounts as we continue to develop TSC and our other product candidates.

As a result, we will need to obtain additional financing in the future in order to complete the development of TSC and fund our other development and operational activities.

We cannot be certain that the additional funding we will require will be available on acceptable terms or at all.

1 unchanged sentence

If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back, discontinue the development or commercialization of one or more of our product candidates, or seek alternative financing opportunities such as collaborations or licensing opportunities.

For example, prior to completing the May 2020 Offering and February 2021 Offering, we determined that we did not have adequate resources to fully support the randomized portion of the TSC GBM Trial and commencement of enrollment in the trial was suspended following the run-in portion.

For example, prior to completing the May 2020 Offering and February 2021 Offering, we determined that we did not have adequate resources to fully support the randomized portion of the GBM Trial and commencement of enrollment in the trial was suspended following the run-in portion.

Furthermore, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves the associated risks and uncertainties.

19 unchanged sentences

We may also in the future enter into collaboration agreements and license agreements with other companies that include milestone expenditures and payments, in which case our ability to generate revenue or achieve profitability may be dependent on the achievement of those milestones.

Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods, and our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity.

Furthermore, due to the uncertainty of the drug development process, we are often unable to predict the timing or amount of increased expenses, or when we will be able to achieve or maintain profitability, if at all.

2 unchanged sentences

Our ability to succeed in the highly competitive pharmaceuticals industry depends upon our ability to attract and retain highly qualified personnel.

As of the date of this Annual Report, we have 13 full-time employees and one part-time employee, including our new Senior Director of Quality Assurance hired during the first quarter of 2021.

As of the date of this Annual Report, we have 14 full-time employees and no part-time employees.

Particularly given our near-term plans for the TSC development program and our compliance requirements with the FDA, SEC, and other regulatory bodies, we believe that our current staffing levels are inadequate to support our future needs.

We anticipate adding additional personnel to our team throughout the organization during 2022 in an effort to support the development of TSC, grow our business more generally, and optimize the size of our organization.

In addition, assuming success in our planned clinical trials, we expect to further supplement and grow our scientific, clinical, regulatory, financial, and other human resources to support our planned research, development, and commercialization plans for TSC and our other product candidates..

In addition, assuming success in our ongoing and planned clinical trials, we expect to further supplement and grow our scientific, clinical, regulatory, financial, and other human resources to support our planned research, development, and commercialization plans for TSC and our other product candidates.

Our ability to effectively manage our anticipated growth will depend on multiple factors, including, among others, our ability to:

• effectively retain current talent and effectively recruit sufficient numbers of new talented employees;

• manage our third-party supply and manufacturing operations effectively and in a cost-effective manner,

• while increasing production capabilities for our current product candidates to commercial levels;

• establish and maintain relationships with development and commercialization partners

• manage our development and commercialization efforts effectively and in a cost-effective manner;

• continue to improve our operational, clinical, financial, management and regulatory compliance controls and reporting systems and procedures;

•    effectively retain current talent and effectively recruit sufficient numbers of new talented employees;

•    manage our third-party supply and manufacturing operations effectively and in a cost-effective manner,

•    while increasing production capabilities for our current product candidates to commercial levels;

•    establish and maintain relationships with development and commercialization partners;

•    manage our development and commercialization efforts effectively and in a cost-effective manner;

•    continue to improve our operational, clinical, financial, management and regulatory compliance controls and reporting systems and procedures.

We are highly dependent on our management and scientific personnel, including our executive officers, certain other key employees and consultants, and the members of our Board.

The loss of the services of any of these individuals could impede, delay, or prevent completion of our planned clinical trials, regulatory approval, or commercialization of TSC or any of our other product candidates.

The loss of the services of any of these individuals could impede, delay, or prevent completion of our ongoing and planned clinical trials, regulatory approval, or commercialization of TSC or any of our other product candidates.

If we lose the services of any of these individuals, we might not be able to find suitable replacements on a timely basis or at all, and our business could be harmed as a result.

All of our employees, including our executive officers with whom we have employment agreements, are employed on an at-will basis and their employment can be terminated by us or them at any time.

As part of our efforts to retain our valuable employees, we, among other things, provide a generous salary and benefits package, as described in more detail in Part I — Item 1.

Business – Our People and Human Capital Resources of this Annual Report

As part of our efforts to retain our valuable employees, we, among other things, provide a generous salary and benefits package, as described in more detail under the heading, " Part I —

Business –

Our People and Human Capital Resources –

Nevertheless, we may be unable to attract or retain qualified management and other key personnel in the future due to the intense competition among biotechnology, pharmaceutical, and other businesses.

4 unchanged sentences

Furthermore, as we currently have no marketed products, we currently have no sales or marketing personnel or capabilities.

To commercialize TSC or any of our other product candidates, if approved, in the we will need to build our marketing, sales, distribution, and other related capabilities or arrange with third parties to perform these services, and we may not be successful in doing so.

To commercialize TSC or any of our other product candidates, if approved, we will need to build our marketing, sales, distribution, and other related capabilities or arrange with third parties to perform these services, and we may not be successful in doing so.

In addition, we have historically utilized the services of certain outside independent contractors to perform a number of critical functions for our company, including with respect to clinical development, regulatory matters, accounting, and human resources, a practice we expect to continue and may choose to expand in the future.

1 unchanged sentence

However, there can be no assurance that we will be able to manage these relationships effectively, that such contractors will be able or choose to continue working with us in the future, or that we will be able to find additional or replacement services if and as needed, on economically reasonable terms or at all.

If we are not able to effectively manage our growth and expand our organization through a combination of effectively retaining our existing employees and third-party contractors and successfully recruiting new employees and contractors, we may be unable to effectively execute on our product development and other strategic plans, which my adversely effect our business, financial condition, or results of operations.

If we are not able to effectively manage our growth and expand our organization through a combination of effectively retaining our existing employees and third-party contractors and successfully recruiting new employees and contractors, we may be unable to effectively execute on our product development and other strategic plans, which may adversely affect our business, financial condition, or results of operations.

If we decide to in-license or acquire one or more additional product candidates or otherwise enter into a strategic transaction, it could impact our liquidity, increase our expenses, and present significant distractions to our management team.

We currently only have two product candidates under active development, our lead product candidate, TSC, and our second product candidates, DFN-529.

We currently only have one product candidate under active development, TSC.

We may in the future implement a strategy to in-license or acquire one or more additional product candidates to supplement our pipeline.

We may also consider a variety of other strategic transactions, including spin-offs, partnerships, joint ventures, restructurings, divestitures, business combinations, and minority investments.

Any such transaction would expose us to a number of risks and uncertainties, including the potential incurrence of recurring, non-recurring (including unknown liabilities), or other charges (including amortization expenses, write-downs, or other impairment charges), increase of short- and long-term expenditures, or dilution our stockholders, as well as posing significant integration, implementation, or retention challenges and diverting our management team’s focus on other priorities, including the TSC development program.

Any such transaction would expose us to a number of risks and uncertainties, including the potential incurrence of recurring, non-recurring (including unknown liabilities), or other charges (including amortization expenses, write-downs, or other impairment charges), increase of short- and long-term expenditures, or dilution to our stockholders, as well as posing significant integration, implementation, or retention challenges and diverting our management team’s focus on other priorities, including the TSC development program.

Any of the foregoing could have a material adverse effect on our business, financial condition, or results of operation.

4 unchanged sentences

If not utilized, the NOL carryforwards will begin expiring during the year ending December 31, 2034.

Under Section 382 of the Tax Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50.0% change, measured by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-ownership change NOL carryforwards and other pre-ownership change tax attributes – such as research tax credits – to offset its post-ownership change income may be limited.

In the year ended December 31, 2019, as a result of the issuance of a significant number of shares our common stock pursuant to the May 2019 Offering, November 2019 Offering, and December 2019 Offering, we performed an analysis under Section 382 of the Tax Code and, as a result of such analysis and a determination that such an ownership change had taken place, we reduced our NOL carryforwards.

Under Section 382 of the Tax Code, if a corporation undergoes an “ownership change,”

generally defined as a greater than 50% change, measured by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-ownership change NOL carryforwards and other pre-ownership change tax attributes –

such as research tax credits –

to offset its post-ownership change income may be limited.

In the event we issue additional shares of common stock to fund our future development efforts and those issuances result in additional ownership changes for purposes of Section 382 of the Tax Code, as we did in the May 2020 Offering and the February 2021 Offering, our NOL carryforwards could be further reduced.

1 unchanged sentence

Our business, financial condition, or results of operations may also be materially adversely affected by a number of general risks related thereto and to our organizational structure that are not specific to our Company, including:

• If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

•    If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

Furthermore, our disclosure controls and procedures are subject to inherent limitations, human error, and other systematic breakdowns, and therefore may not prevent or detect all errors or acts of fraud.

As a result, stockholders could lose confidence in our financial and other public reporting, which could harm our business, financial condition, or results of operations.

• As our Company, the industry in which we operate, and the world-at-large become increasingly virtual, our acquisition and implementation of additional information technology solutions and our compliance with global privacy and data security requirements could result in additional costs and liabilities or inhibit our ability to collect and process data globally.

Furthermore, any failure to comply with applicable requirements or best practices – as well as other events outside of our control – could result in a security breach or other disruption to our information technology systems, limit our capacity to effectively monitor and control our operations, compromise our or third parties’ confidential information, or otherwise adversely affect our business, financial condition, or results of operations.

• We incur significant costs as a result of our public company status and devote substantial management time to operating as a public company, including complying with the applicable requirements of the Securities Act, the Exchange Act, the Dodd-Frank Act, SOX, and the rules and regulations of Nasdaq.

•    As our Company, the industry in which we operate, and the world-at-large become increasingly virtual, our acquisition and implementation of additional information technology solutions and our compliance with global privacy and data security requirements could result in additional costs and liabilities or inhibit our ability to collect and process data globally.

Furthermore, any failure to comply with applicable requirements or best practices –

as well as other events outside of our control –

could result in a security breach or other disruption to our information technology systems, limit our capacity to effectively monitor and control our operations, compromise our or third parties’

confidential information, or otherwise adversely affect our business, financial condition, or results of operations.

•    We incur significant costs as a result of our public company status and devote substantial management time to operating as a public company, including complying with the applicable requirements of the Securities Act, the Exchange Act, the Dodd-Frank Act, SOX, and the rules and regulations of Nasdaq.

If, in the future, we are required to include in our annual report an attestation of our independent registered public accounting firm regarding internal control over financial reporting, the amount of these compliance costs would increase significantly.

• Although we have in place business continuity and disaster recovery plans, our business, financial condition, or results of operations could be negatively affected by volatility, disruptions, or other uncertainty caused by market fluctuations, economic downturns or unfavorable global economic conditions, pandemics, natural disasters or other catastrophic events, events of war, terrorism, or other man-made problems, or other geopolitical events outside of our control, including the COVID-19 pandemic and Brexit.

• If we fail to comply with applicable laws and regulations, including the healthcare laws and regulations described in Part I – Item 1.

Business – Certain Other Legislation and Regulations – Current Healthcare Laws and Regulations of this Annual Report and applicable environmental, health, and safety laws and regulations, we could become subject to fines, penalties, or other consequences.

•    Although we have in place business continuity and disaster recovery plans, our business, financial condition, or results of operations could be negatively affected by volatility, disruptions, or other uncertainty caused by market fluctuations, economic downturns or unfavorable global economic conditions, pandemics, natural disasters or other catastrophic events, events of war, terrorism, or other man-made problems, or other geopolitical events outside of our control, including the COVID-19 pandemic and Brexit.

•    If we fail to comply with applicable laws and regulations, including the healthcare laws and regulations described under the heading, Part I –

Business –

Certain Other Legislation and Regulations –

Current Healthcare Laws and Regulations and applicable environmental, health, and safety laws and regulations, we could become subject to fines, penalties, or other consequences.

Risks Related to Ownership of Our Common Stock

If we cannot continue to satisfy the NASDAQ Capital Market continued listing standards and other NASDAQ rules, our Common Stock could be delisted, which would harm our business, the trading price of our Common Stock, our ability to raise additional capital and the liquidity of the market for our Common Stock.

Our common stock is currently listed on the NASDAQ Capital Market.

To maintain the listing of our common stock on the NASDAQ Capital Market, we are required to meet certain listing requirements, including, among others, either:

(i) a minimum bid price of $1.00 per share, a market value of publicly held shares (excluding shares held by our executive officers, directors and 10% or more stockholders) of at least $1 million and stockholders’

equity of at least $2.5 million;

or (ii) a minimum bid price of $1.00 per share, a market value of publicly held shares (excluding shares held by our executive officers, directors and 10% or more stockholders) of at least $1 million and a total market value of listed securities of at least $35 million.

There is no assurance that we will regain and continue to meet the Bid Price Rule and Nasdaq’s other listing requirements.

As previously disclosed, on May 6, 2021, we received a written notice from the Staff indicating that the Company was not in compliance with the Bid Price Rule because the bid price for the Company’s common stock had closed below $1.00 per share for the previous 30 consecutive business days.

On November 3, 2021, after failing to regain compliance with the Bid Price Rule within 180 days of receipt of the first notice, we received an additional notice from the Staff providing that, although the Company had not regained compliance with the Bid Price Rule by the previously stated deadline, in accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company would be granted an additional 180 calendar days, or until May 2, 2022, to regain compliance with the Bid Price Rule.

To regain compliance with the Bid Price Rule, the bid price for our common stock must close at $1.00 per share or more for a minimum of 10 consecutive business days.

NASDAQ’s written notice has no effect on the listing or trading of our common stock at this time, and we are currently evaluating our alternatives to resolve this listing deficiency.

We have filed with the SEC a proxy statement relating to the Special Meeting, to be held on April 14, 2022, at which our stockholders will vote on a proposal to approve an amendment to our Certificate of Incorporation to effect the Reverse Stock Split, with the final decision of whether to proceed with the Reverse Stock Split, the effective time of the Reverse Stock Split, and the exact ratio of the Reverse Stock Split to be determined by the Board, in its discretion, at any time prior to December 31, 2022.

However, there can be no assurance that the Reverse Stock Split will be approved at the Special Meeting or, if approved, will result in a sustained higher stock price, if effected, that will allow us to regain compliance with the Bid Price Rule and meet the NASDAQ stock price listing requirements, and there is no guarantee we will continue to satisfy the other NASDAQ Capital Market continued listing standards.

In the event that our common stock is delisted from NASDAQ and is not eligible for quotation or listing on another market or exchange, trading of our common stock could be conducted only in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board.

In such event, it could become more difficult for us to raise capital and for our stockholders to dispose of, or obtain accurate price quotations for, our common stock, and there would likely also be a reduction in our coverage by securities analysts and the news media, which could cause the price of our common stock to decline further.

Our stock price is volatile and any investment in our securities may suffer a decline in value.

In addition, this volatility may subject our business to additional risks, such as an increased risk of securities litigation or inability to meet the continued listing requirements of Nasdaq.

During the year ended December 31, 2020, the closing market price for our common stock varied between a high of $1.50 on July 21, 2020 and a low of $0.26 on March 16, 2020.

In addition, this volatility may subject our business to additional risks, such as an increased risk of securities litigation.

During the year ended December 31, 2021, the closing market price for our common stock as reported by Nasdaq varied between a high of $1.70 on February 16, 2021 and December 31, 2021 and a low of $0.31 on December 29-31, 2021.

As a result of fluctuations in the price of our common stock, you may be unable to sell shares or our common stock at or above the price you paid for them, even if your holding period is relatively short.

The market price of our common stock is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market, industry and other factors, including the degree of analyst coverage of our stock, their valuations and recommendations, and whether any such analysts publish inaccurate or unfavorable research about our business.

If the results of our business do not meet these analysts’ forecasts, the expectations of investors or the financial guidance we provide to investors in any period, the market price of our common stock could decline.

If the results of our business do not meet these analysts’

forecasts, the expectations of investors or the financial guidance we provide to investors in any period, the market price of our common stock could decline.

Furthermore, despite this volatility, due to the fact that we have never declared or paid cash dividends on our common stock and do not currently anticipate declaring or paying any cash dividends in the foreseeable future, we expect that only appreciation of the price of our common stock, if any, will provide a return to our stockholders for the foreseeable future.

Historically, the stock markets in general, and the markets for biotechnology stocks in particular, have experienced significant volatility that has at times been unrelated to the business, financial condition, or results of operations of particular companies.

Historically, the stock markets in general, and the markets for biotechnology stocks in particular, have experienced significant volatility that has at times been unrelated to the financial condition or results of operations of particular companies.

These broad market fluctuations may adversely affect the trading price of our common stock and, consequently, adversely affect the price at which you are able to sell any shares of our common stock that you own.

In the past, following periods of volatility in the market or significant price declines in individual securities or the market as a whole, securities class-action litigation has often been instituted against companies.

Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, or results of operations.

In addition, our common stock is currently listed on the Nasdaq Capital Market.

To maintain the listing of our common stock on the Nasdaq Capital Market, we are required to meet certain listing requirements, including, among others, maintaining a minimum closing bid price for our common stock.

Particularly given the historical volatility experienced by our common stock, there is no assurance that we will continue to meet the minimum closing price requirement and other listing requirements of Nasdaq.

We have funded our operations to date through the issuance of securities, including common stock, warrants to purchase common stock, convertible preferred stock, and convertible debt securities, and we expect that in the future we will need to raise additional capital through similar means to fund our continued development efforts for TSC and our other liquidity needs.

Assuming funding is available on acceptable terms, any future issuance of common stock or securities convertible for or exchangeable into common stock will result in dilution to our existing stockholders and could depress the market price of our common stock.

Furthermore, the terms of future financing transaction may contain provisions that restrict our operations or require us to relinquish certain rights to our product candidates or other technologies.

Although we believe we have sufficient cash resources to fund the TSC Oxygenation Trials, our Planned Phase 2 Hypoxia-related Indication Trial, and our other operating expenses and capital expenditure requirements through 2023, we will in the future need to raise additional funds to continue our operations, fund additional clinical trials evaluating TSC and our other product candidates, and, if approved, commercializing TSC.

Furthermore, the terms of future financing transactions may contain provisions that restrict our operations or require us to relinquish certain rights to our product candidates or other technologies.

Although we believe we have sufficient cash resources to fund our other operating expenses and capital expenditure requirements through 2023, we will in the future need to raise additional funds to continue our operations, fund additional clinical trials evaluating TSC and our other product candidates, and, if approved, commercializing TSC.

We plan to continue to finance our operations with a combination of equity issuances, debt arrangements, and, potentially, licensing, or other partnering relationships.

1 unchanged sentence

Accordingly, new issuances of a substantial number of shares of our common stock could occur at any time.

For example, in February 2021, we issued 33,658,538 shares of our common stock in connection with the completion of the February 2021 Offering.

For example, in February 2021, we issued approximately 33.7 million shares of our common stock in connection with the completion of the February 2021 Offering.

Any issuance or sale of shares, or the perception in the market of an intent to issue or sell shares in the near-term, by the Company or holders of a large number of shares could reduce the market price of our common stock.

4 unchanged sentences

We may also in the future raise additional funds through strategic partnerships, alliances, and licensing arrangements with third parties, any of which could require us to relinquish valuable rights to TSC or our other product candidates.

The restrictions imposed by any of these arrangement could materially decrease any potential returns on our investment in TSC or our other product candidates, or otherwise materially and adversely effect our business, financial condition, or results of operations.

The restrictions imposed by any of these arrangements could materially decrease any potential returns on our investment in TSC or our other product candidates, or otherwise materially and adversely affect our business, financial condition, or results of operations.

Our organizational documents impose certain anti-takeover provisions and make the Delaware Chancery Court the exclusive forum for certain stockholder actions, which could depress the trading price of our common stock.

4 unchanged sentences

our Board is expressly authorized to amend, restate, or repeal our Bylaws;

advance notice is required with respect to any nominations for election to our Board or for proposing matters that can be acted upon by stockholders at any meeting of stockholder s.

advance notice is required with respect to any nominations for election to our Board or for proposing matters that can be acted upon by stockholders at any meeting of stockholders.

In addition our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for certain actions, including derivative actions brought on the Company's behalf, stockholder actions claiming breaches of a fiduciary duty owed by any of our directors or officers, and claims arising under our organizational documents, in each case, subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.

Although this provision would not apply to any stockholder claims under the Exchange Act, there is uncertainty regarding whether a court would enforce such a forum selection provision as written would apply to stockholder claims under the Securities Act.

Nevertheless, this forum selection provision may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, or agents, which may discourage lawsuits against us and such persons.

Nevertheless, this forum selection provision may limit our stockholders’

ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, or agents, which may discourage lawsuits against us and such persons.

The limitations on certain stockholder rights imposed by these provisions could also depress the trading price of our common stock.

UNRESOLVED STAFF COMMENTS

Our principal executive office is located in a leased facility in Charlottesville, Virginia, where we lease approximately 8,000 square feet of office space for approximately $10,000 per month.

The current term of our Charlottesville lease will expire in April 2022.

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 1A. Risk Factors