What changed in this filing

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Item 1A. Risk Factors

2023-11-13 compared with 2023-08-11 · 53 added, 50 removed, 843 unchanged (11% of the section changed)

6 unchanged sentences

Our recurring losses from operations raise substantial doubt regarding our ability to continue as a going concern.

For the six months ended June 30, 2023, our net losses were $10.6 million and as of June 30, 2023, we had an accumulated deficit of $285.0 million.

For the nine months ended September 30, 2023, our net losses were $14.2 million and as of September 30, 2023, we had an accumulated deficit of $288.6 million.

We anticipate operating losses to continue for the foreseeable future due to, among other things, costs related to research, development of our product candidates, conducting preclinical studies and clinical trials, and our administrative organization.

We will require substantial additional financing to fund our operations and to continue to execute our strategy, and we will pursue a range of options to secure additional capital.

We believe that our cash and cash equivalents at June 30, 2023 are not sufficient to fund our current and planned operations for at least the next twelve months.

We believe that our cash and cash equivalents at September 30, 2023 are not sufficient to fund our current and planned operations for at least the next twelve months.

These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date of the issuance of the consolidated financial statements included in this Quarterly Report on Form 10-Q.

We are exploring various sources of funding such as strategic collaborations and the issuance of equity, such as the issuance of common stock under the ATM Program, to fund our operations.

We are exploring various sources of funding such as strategic collaborations and the issuance of equity to fund our operations.

If we raise additional funds through strategic collaborations and alliances, which may include existing collaboration partners, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us.

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We may never achieve or maintain profitability.

We have a history of net losses and negative cash flows from operating activities since inception and, as of June 30, 2023, had an accumulated deficit of $285.0 million.

We have a history of net losses and negative cash flows from operating activities since inception and, as of September 30, 2023, had an accumulated deficit of $288.6 million.

We have financed our operations primarily through equity securities, and to a lesser extent from loans and grants.

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acquire or in-license other product candidates and technologies;

operate as a public company and maintain our compliance with Nasdaq listing requirements.

operate as a public company, including costs associated with regaining and maintaining Nasdaq listing compliance.

We have never generated any revenue from product sales and may never be profitable.

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However, our existing cash and cash equivalents may prove to be insufficient for these activities.

If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs, product portfolio expansion or future commercialization efforts.

If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs, product portfolio expansion or future

commercialization efforts.

Adequate additional financing may not be available to us on acceptable terms, or at all.

addition, we may seek additional financing due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our operating plans.

In addition, we may seek additional financing due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our operating plans.

If we are unable to obtain adequate financing, we will evaluate options, which may include reducing or deferring operating expenses, including by downsizing our workforce and curtailing certain development programs, which could have a material adverse effect on our operations and financial results.

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We do not have any committed external source of funds.

To the extent that we raise additional capital through the sale of equity, such as our public offering of shares of our common stock in May 2021 or issuances of common stock under our ATM Program, or convertible debt securities, an investor’s ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that may adversely affect an investor’s rights as a common stockholder.

To the extent that we raise additional capital through the sale of equity, such as issuances of common stock under our ATM Program or the 2023 Registered Direct Offering, or convertible debt securities, an investor’s ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that may adversely affect an investor’s rights as a common stockholder.

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, and may be secured by all or a portion of our assets.

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We may not be able to maintain compliance with our debt covenants in the future.

The Hercules Term Loan Agreement contains customary affirmative and negative covenants which, among other things, required the Company to maintain at all times a minimum qualified cash balance equaling $2.25 million effective as of March 7, 2023 and limits our ability to (i) incur additional indebtedness, (ii) pay dividends or make certain distributions, (iii) dispose of our assets, grant liens or encumber our assets or (iv) fundamentally alter the nature of our business.

The Hercules Loan Agreement contains customary affirmative and negative covenants which, among other things, required the Company to maintain at all times a minimum qualified cash balance equaling $2.25 million effective as of March 7, 2023 and limits our ability to (i) incur additional indebtedness, (ii) pay dividends or make certain distributions, (iii) dispose of our assets, grant liens or encumber our assets or (iv) fundamentally alter the nature of our business.

These covenants are subject to a number of exceptions and qualifications.

If we breach these financial covenants and fail to secure a waiver or forbearance from the third-party lender, such breach or failure could accelerate the repayment of the outstanding borrowings under the Hercules Term Loan or the exercise of other rights or remedies the third-party lender may have under applicable law.

If we breach these covenants and fail to secure a waiver or forbearance from the third-party lender, such breach or failure could accelerate the repayment of the outstanding borrowings under the Hercules Term Loan or the exercise of other rights or remedies the third-party lender may have under applicable law.

No assurance can be provided that a waiver or forbearance will be granted or the outstanding borrowings under the Hercules Term Loan, will be successfully refinanced on terms that are acceptable to the Company.

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We anticipate that we will retain all of our future earnings for use in the operation of our business and for general corporate purposes.

Further, the terms of the Hercules Term Loan Agreement limit us from paying dividends or making certain distributions.

Further, the terms of the Hercules Loan Agreement limit us from paying dividends or making certain distributions.

Any determination to pay dividends in the future will be at the discretion of our board of directors.

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We intend to fulfill our debt service obligations, including repayment of the principal of the Hercules Term Loan, from cash generated from our future operations, from our existing cash, and potential additional cash proceeds from our ATM Program or other future equity financings.

Our indebtedness could have significant additional negative consequences, including requiring the dedication of a substantial portion of our expected cash flow to service our indebtedness, thereby

reducing the amount of our expected cash flow available for other purposes and limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete.

Our indebtedness could have significant additional negative consequences, including requiring the dedication of a substantial portion of our expected cash flow to service our indebtedness, thereby reducing the amount of our expected cash flow available for other purposes and limiting our flexibility in planning for, or

reacting to, changes in our business and the industry in which we compete.

If we are unable to generate sufficient cash to meet these obligations and need to use existing cash in order to fund our debt service obligations, including repayment of the principal, we may have to delay or curtail research and development programs.

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The success of our business, including our ability to finance our Company and generate revenue from products in the future, which we do not expect will occur for several years, if ever, will depend heavily on the successful development and any eventual commercialization of the product candidates we develop.

Our current product candidates, and any future

product candidates we develop, will require additional preclinical and clinical development, management of clinical, preclinical and manufacturing activities, marketing approval in the United States and other markets, demonstrating cost-effectiveness to pricing and reimbursement authorities, obtaining sufficient manufacturing supply for both clinical development and commercial production in accordance with current Good Manufacturing Practices (“cGMP”) or similar regulatory requirements outside the United States, building of a commercial organization, and substantial investment and significant marketing efforts before we generate any revenue from product sales.

Our current product candidates, and any future product candidates we develop, will require additional preclinical and clinical development, management of clinical,

preclinical and manufacturing activities, marketing approval in the United States and other markets, demonstrating cost-effectiveness to pricing and reimbursement authorities, obtaining sufficient manufacturing supply for both clinical development and commercial production in accordance with current Good Manufacturing Practices (“cGMP”) or similar regulatory requirements outside the United States, building of a commercial organization, and substantial investment and significant marketing efforts before we generate any revenue from product sales.

We may also experience delays in developing a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us from completing our clinical trials or commercializing our product candidates on a timely or profitable basis, if at all.

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The lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market our product candidates, which would significantly harm our business, results of operations and prospects.

In addition, even if we were to obtain approval, regulatory authorities may approve our product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials, including Phase 4 clinical trials, and/or the implementation of a REMS program, which may be required to assure safe use of the drug after approval.

In addition, even if we were to obtain approval, regulatory authorities may approve our product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials, including Phase 4 clinical trials, and/or the implementation of a risk evaluation and mitigation strategy (REMS) program, which may be required to assure safe use of the drug after approval.

Regulatory authorities may also approve a product candidate for a more limited indication or patient population than we originally requested, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate.

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If we fail to attract and retain highly qualified personnel, we may not be able to successfully develop, manufacture or commercialize our product candidates.

We have experienced recent changes in management and other key personnel in critical functions across our organization, including in connection with the Zikani Merger.

Changes in management and other key personnel have the potential to disrupt our business, and any such disruption could adversely affect our operations, programs, growth, financial condition or results of operations.

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If we cannot obtain new patents, maintain our existing patents and protect the confidentiality and proprietary nature of our trade secrets and other intellectual property, our business and competitive position may be harmed.

Our success will depend in part on our ability to obtain and maintain patent and regulatory protections for our product candidates, to preserve our trade secrets and other proprietary rights, to operate without infringing the proprietary rights of third parties, and to prevent third parties from circumventing our rights.

third parties, and to prevent third parties from circumventing our rights.

Due to the time and expense of bringing new product candidates through development and regulatory approval to the marketplace, there is particular importance in obtaining patent and trade secret protection for significant new technologies, products and processes.

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However, as our product candidates progress into clinical trials and commercialization, if at all, our public profile and that of our product candidates may be raised and generate such claims.

Defending against such claims, and occurrence of a judgment adverse to us, could result in

unanticipated costs and may have a material adverse effect on our business and competitive position.

Defending against such claims, and occurrence of a judgment adverse to us, could result in unanticipated costs and may have a material adverse effect on our business and competitive position.

If our products, methods, processes and other technologies infringe the proprietary rights of other parties, we may incur substantial costs and we may have to:

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Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of novelty, obviousness, lack of written description, or non-enablement.

Third parties might allege

unenforceability of our patents because during prosecution of the patent an individual connected with such prosecution withheld relevant information or made a misleading statement.

Third parties might allege unenforceability of our patents because during prosecution of the patent an individual connected with such prosecution withheld relevant information or made a misleading statement.

Interference or derivation proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications.

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We enter into agreements with our employees pursuant to which they agree that any inventions created in the scope of their employment or engagement are assigned to us or owned exclusively by us, without the employee retaining any rights.

significant portion of our intellectual property has been developed by our employees in the course of their employment for us.

A significant portion of our intellectual property has been developed by our employees in the course of their employment for us.

Under the Israeli Patent Law, 5727-1967 (the “Patent Law”), inventions conceived by an employee during the scope of his or her employment with a company are regarded as “service inventions,”

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Risks Related to Our Common Stock

The delisting of our common from The Nasdaq Capital Market and our trading on the OTC Pink Marketplace will result in a more limited market and lack of liquidity for our securities and may make it more difficult to raise funds on terms acceptable to us.

As previously reported, on October 12, 2023, we received the Delisting Notification from the Staff of the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) stating that Nasdaq would suspend trading in our common stock, effective at the opening of trading on October 16, 2023, because the Company had not regained compliance with the Nasdaq Listing Rule 5550(b)(2) (the “Listing Rule”), which requires a listed company to have at least $35 million in market value of listed securities (“MVLS”), during the grace period previously granted to the Company.

Effective October 13, 2023, and during the suspension of trading on The Nasdaq Capital Market, our common stock will trade on the OTC Pink Marketplace under the symbol “ELOX.”

As previously disclosed, the Staff initially notified us on October 11, 2022 that the Company had not been in compliance with the Listing Rule for a period of 30 consecutive business days.

The Staff granted the Company a period of 180 calendar days to regain compliance with the Listing Rule.

On April 11, 2023, Nasdaq notified the Company that the Common Stock was subject to delisting from the Nasdaq Capital Market as a result of not regaining compliance with the Listing Rule during the initial grace period.

We appealed the Staff’s delisting determination at a hearing before the Nasdaq Hearings Panel (the “Panel”) held on May 18, 2023, following which the Panel granted the Company an extension through July 30, 2023 and, following the Company’s July 27, 2023 request to the Panel, the Panel granted a further extension until October 9, 2023.

On October 26, 2023, we requested a review of the Staff’s delisting determination by the Nasdaq Listing Council.

As of the date of this Quarterly Report on Form 10-Q, the Listing Council’s review remains ongoing.

Trading in our common stock will remain suspended pending the outcome of the Listing Council’s review process.

Nasdaq will not take any action to delist the Company’s securities pending a final written decision by the Listing Council.

If the Listing Council does not grant our appeal to maintain our listing, a Form 25-NSE will be filed with the Securities and Exchange Commission, which will remove our securities from listing and registration on The Nasdaq Capital Market.

There can be no assurance that the Listing Council will grant the Company’s request for continued listing on The Nasdaq Capital Market.

The trading of our common stock in the OTC Pink Marketplace may have an unfavorable impact on our stock price and liquidity.

The OTC Pink Marketplace is a significantly more limited market than Nasdaq.

The quotation of our shares on such marketplace may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could further depress the trading price of our common stock, and could have a long-term adverse impact on our ability to raise capital in the future.

As previously reported, our common stock was suspended from trading on The Nasdaq Capital Market effective October 16, 2023 as a result of our non-compliance with the Listing Rule.

For so long as this suspension remains in effect, and until our common stock resumes trading on Nasdaq, sales of our common stock may not be made under our ATM program pursuant to the terms of our sales agreement with Oppenheimer & Co.

Inc., unless they otherwise agree.

The delisting of our common stock from Nasdaq would result in a more limited market and lack of liquidity for our securities and may make it more difficult for us to raise capital on favorable terms in the future.

Further, a delisting may impair your ability to sell or purchase our common stock when you wish to do so.

In addition, with the delisting from Nasdaq, our common stock ceases to be recognized as covered securities and we would be subject to regulation in each state in which we offer our securities.

There is no assurance that any actions that we take to restore our compliance with the Minimum Market Value Requirement required for continued listing or prevent future non-compliance with Nasdaq’s listing requirements.

There is also no assurance that we will maintain compliance with the other listing requirements of The Nasdaq Capital Market.

Our stock price may be volatile, and purchasers of our common stock could incur substantial losses.

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These market fluctuations may also materially and adversely affect the market price of shares of our common stock.

Our failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a delisting of our common stock.

If we fail to satisfy the continued listing requirements of The Nasdaq Capital Market, such as the minimum closing bid price requirement, Nasdaq may take steps to delist our common stock.

For example, on October 11, 2022, we received a letter from Nasdaq Listing Qualifications notifying us that for the last 30 consecutive business days, the Company’s Minimum Value of Listed Securities, as defined by Nasdaq (“MVLS”), has been below the minimum $35 million requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5500(b)(2) (the “Minimum Market Value Requirement”).

Under Nasdaq Listing Rule 5810(c)(3)(C), the Company was given 180 calendar days, or until April 10, 2023, to regain compliance with the Minimum Market Value Requirement.

On April 11, 2023, we received a determination letter from Nasdaq Listing Qualifications stating that the Company has not regained compliance with Listing Rule 5550(b)(2), requiring the Company to maintain a MVLS of a minimum of $35 million, during the 180-day grace period previously granted to the Company.

As a result of not regaining compliance with the MVLS requirement during the 180-day period, the Company’s common stock is subject to delisting from the Nasdaq Capital Market.

Pursuant to the Letter, unless the Company timely requests a hearing to appeal the Staff’s determination, trading of the Company’s Common Stock would be suspended at the opening of business on April 20, 2023, and a Form 25-NSE would be filed with the Securities and Exchange Commission, which would remove the Company’s Common Stock from listing and registration on Nasdaq.

On August 3, 2023, we announced that the Nasdaq Hearings Panel determined to extend the previously granted extension from July 30, 2023 until October 9, 2023 (the “Extension”) to regain compliance with Nasdaq Listing Rule 5550(b)(2).

The Extension is conditioned upon achievement of certain milestones included in a plan of compliance which the Company previously submitted to the Hearings Panel.

There can be no assurance that we will be able to achieve these milestones or otherwise be able to maintain our continued listing on the Nasdaq Capital Market.

The delisting of our common stock from Nasdaq may make it more difficult for us to raise capital on favorable terms in the future.

Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so.

Further, if we were to be delisted from Nasdaq, our common stock would cease to be recognized as covered securities and we would be subject to regulation in each state in which we offer our securities.

Moreover, there is no assurance that any actions that we take to restore our compliance with the Minimum Market Value Requirement required for continued listing or prevent future non-compliance with Nasdaq’s listing requirements.

There is also no assurance that we will maintain compliance with the other listing requirements of The Nasdaq Capital Market.

General Risk Factors

Maintaining and improving our financial controls and the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), and Nasdaq stock market rules.

The requirements of these rules and regulations have increased and will continue to significantly increase our legal and financial compliance costs, including costs associated with the hiring of additional personnel, making some activities more difficult, time-consuming or costly, and may also place undue strain on our personnel, systems and resources.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Nasdaq stock market rules and the rules and requirements of the OTC marketplace.

The requirements of these rules and regulations have increased and may continue to significantly increase our legal and financial compliance costs, including costs associated with the hiring of additional personnel, making some activities more difficult, time-consuming or costly, and may also place undue strain on our personnel, systems and resources.

The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition.

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Future sales and issuances of our securities or rights to purchase securities, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause the prices of our securities to fall.

Additional capital will be needed in the future to continue our planned operations.

To the extent we raise additional capital by issuing equity securities or our ATM Program pursuant to which we may sell up to $50.0 million of our common stock, our stockholders may experience substantial dilution.

We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner, we determine from time to time.

If we sell common

stock, convertible securities or other equity securities in one or more transactions, existing investors may be materially diluted by subsequent sales, and new investors could gain rights superior to our existing stockholders.

We will need additional capital in the future to continue our planned operations.

To the extent we raise additional capital by issuing equity securities, including through our ATM Program to the extent eligible, pursuant to which we may sell up to $50.0 million of our common stock, our stockholders may experience substantial dilution.

We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner, we determine from time

If we sell common stock, convertible securities or other equity securities in one or more transactions, existing investors may be materially diluted by subsequent sales, and new investors could gain rights superior to our existing stockholders.

Pursuant to our 2018 Equity Incentive Plan, our management is authorized to grant stock options and other equity-based awards to our employees, directors and consultants.

As of December 31, 2022, individuals held share awards to purchase or receive an aggregate of 249,403 shares of our common stock.

As of September 30, 2023, individuals held share awards to purchase or receive an aggregate of 486,385 shares of our common stock.

If our board of directors elects to increase the number of shares available for future grant by the maximum amount each year (5% of the outstanding common stock), our stockholders may experience additional dilution, which could have a negative effect on our share price.

Unregistered Sales of Equi ty Securities, Use of Proceeds, and Issuer Purchases of Equity Securities .

Defaults Upo n Senior Securities.

Mine Safe ty Disclosures.

Not applicable.

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

What changed 10-Q

Item 1A. Risk Factors