What changed in this filing

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Item 1A. Risk Factors

2018-11-08 compared with 2018-08-10 · 94 added, 107 removed, 473 unchanged (30% of the section changed)

6 unchanged sentences

The risks arising with respect to the historic Sevion business and operations may be different from what we anticipate, which could lead to significant, unexpected costs and liabilities and could materially and adversely affect our business going forward.

We may not have fully anticipated the extent of the risks associated with the recent reverse merger between Sevion and Eloxx Limited.

We may not have fully anticipated the extent of the risks associated with the reverse merger between Sevion and Eloxx Limited.

After the reverse merger, Sevion’s historic business was discontinued, but prior to the transaction Sevion had a long operating history.

7 unchanged sentences

Since our inception, we have incurred significant operating losses.

Our net loss was $22.0 million and $6.6 million for the six months ended June 30, 2018 and 2017, respectively.

As of June 30, 2018, we had an accumulated deficit of $61.0 million.

Recently, on April 30, 2018, we completed an underwritten public offering of 5,899,500 shares of our common stock at a price to the public of $9.75 per share, including 769,500 shares sold pursuant to the exercise in full of the underwriters’ option to purchase additional shares, or the Public Offering.

Our net loss was $33.2 million and $10.6 million for the nine months ended September 30, 2018 and 2017, respectively.

As of September 30, 2018, we had an accumulated deficit of $72.1 million.

On April 30, 2018, we completed an underwritten public offering of 5,899,500 shares of our common stock at a price to the public of $9.75 per share, including 769,500 shares sold pursuant to the exercise in full of the underwriters’ option to purchase additional shares, or the Public Offering.

The gross proceeds from the Public Offering were approximately $53.6 million, before deducting the underwriting discounts and commissions and offering expenses.

37 unchanged sentences

Our commercial revenue, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all.

Accordingly, even with the recent Public Offering, we will need substantial additional funding in connection with our continuing operations and to achieve our goals.

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

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 fina ncing may not be available to us on acceptable terms, or at all.

Acc ordingly, even with the Public Offering, we will need substantial additional funding in connection with our continuing operations and to achieve our goals.

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

I f 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.

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.

23 unchanged sentences

Rates of patient enrollment are affected by many factors, including the size of the patient population, the eligibility criteria for the clinical trial, the age and condition of the patients, the stage and severity of disease, the nature of the protocol, the proximity of patients to clinical sites and the availability of effective treatments for the relevant disease.

We and our collaborating partners may be subject, directly or indirectly, to federal and state healthcare fraud and abuse and false claims laws and regulations.

If we or our collaborating partne rs are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

We and our collaborating partners may be subject, directly or indirectly, to federal and state he althcare fraud and abuse and false claims laws and regulations.

If we or our collaborating partners are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

All marketing activities associated with product candidates that are approved for sale in the United States, if any, will be, directly or indirectly through our customers, subject to numerous federal and state laws governing the marketing and promotion of pharmaceutical products in the United States, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act and HIPAA.

11 unchanged sentences

Many of these state laws apply where a claim is submitted to any third-party payer and not merely a federal healthcare program.

When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties up to $11,000 for each separate false claim.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) created several new federal crimes, including health care fraud, and false statements relating to health care matters.

5 unchanged sentences

Positive results from preclinical or in vitro and in vivo testing of ELX-02 are not necessarily predictive of the results of future clinical trials of ELX-02.

If we cannot achieve positive results in our clinical trials for ELX-02, we may be unable to succ essfully develop, obtain regulatory approval for and commercialize ELX-02.

If we cannot achieve positive results in our clinical trials for ELX-02, we may b e unable to successfully develop, obtain regulatory approval for and commercialize ELX-02.

Positive results from our preclinical testing of ELX-02 in vitro and in vivo may not necessarily be predictive of the results from our planned clinical trials in humans.

45 unchanged sentences

These collaborators may also have relationships with other commercial entities, some of whom may compete with us and we may be unable to prevent them from establishing competing businesses or developing competing products.

We are subject to extensive governmen tal regulation including the requirements of FDA and comparable foreign regulatory authorities for approval of our product candidates before they can be marketed.

We are subject to extensi ve governmental regulation including the requirements of FDA and comparable foreign regulatory authorities for approval of our product candidates before they can be marketed.

We, our product candidates, our suppliers, our contract manufacturers, our contract testing laboratories and our clinical trial sites and clinical trial researchers are subject to extensive regulation by the FDA and comparable foreign regulatory authorities.

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otherwise diminish any competitive advantages that we may have with respect to such product candidate.

We may not obtain the necessary U.S., EMA or other worldwide regulatory approvals to commercialize our product candidates in a timely manner, if at all, which would have a material adverse effect on our business, results of operations and financial condition.

We may not obtain the nece ssary U.S., EMA or other worldwide regulatory approvals to commercialize our product candidates in a timely manner, if at all, which would have a material adverse effect on our business, results of operations and financial condition.

We need FDA approval to commercialize our product candidates in the United States, EMA approval to commercialize our product candidates in the European Union and approvals from other foreign regulatory authorities to commercialize our product candidates elsewhere in the world.

In order to obtain FDA approval of any of our product candidates, we must submit to the FDA an NDA demonstrating that the product candidate is safe for humans and effective for its intended use.

demonstration requires significant research and animal tests, which are referred to as preclinical studies, as well as human tests, which are referred to as clinical trials.

This demonstration requires significant research and animal tests, which are referred to as preclinical studies, as well as human tests, which are referred to as clinical trials.

In the European Union, we must submit a Marketing Authorization Application, or MAA, to the EMA.

Satisfaction of the FDA’s, the EMA’s and other foreign regulatory authorities’ regulatory requirements typically takes many years, depends upon the type, complexity a nd novelty of the product candidate and requires substantial resources for research, development and testing.

Even if we comply with all the requests of regulatory authorities, the y may ultimately reject the marketing applications that we file for our prod uct candidates, or we might not obtain regulatory clearance in a timely manner.

Companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced or late-stage clinical trials, even after obtaining promising earlie r trial results or preliminary findings or other comparable results for such clinical trials.

Further, even if favorable testing data is generated during the clinical trials of a product candidate, the applicable regulatory authority may not accept or appr ove the marketing application filed by a pharmaceutical or biotechnology company for the product candidate.

Failure to obtain approval of the FDA, EMA or comparable foreign regulatory authorities of any of our product candidates in a timely manner, if at a ll, will severely undermine our business, financial condition and results of operation by reducing our potential marketable products and our ability to generate corresponding product revenues.

Satisfaction of the FDA’s, the EMA’s and other foreign regulatory authorities’ regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product candidate and requires substantial resources for research, development and testing.

Even if we comply with all the requests of regulatory authorities, they may ultimately reject the marketing applications that we file for our product candidates, or we might not obtain regulatory clearance in a timely manner.

Companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced or late-stage clinical trials, even after obtaining promising earlier trial results or preliminary findings or other comparable results for such clinical trials.

Further, even if favorable testing data is generated during the clinical trials of a product candidate, the applicable regulatory authority may not accept or approve the marketing application filed by a pharmaceutical or biotechnology company for the product candidate.

Failure to obtain approval of the FDA, EMA or comparable foreign regulatory authorities of any of our product candidates in a timely manner, if at all, will severely undermine our business, financial condition and results of operation by reducing our potential marketable products and our ability to generate corresponding product revenues.

Our research and clinical efforts may not result in drugs that the FDA, EMA or foreign regulatory authorities consider safe for humans and effective for indicated uses, which would have a material adverse effect on our business, results of operations and financial condition.

9 unchanged sentences

Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies or successfully commercialize any of our product candidates.

Even though we have received orphan drug designation from the FDA for ELX-02 for the treatment of cystinosis, we may not be able to obtain orphan drug marketing exclusivity for ELX-02 or any of our other potential product candidates for other indications.

Even though we have received orphan dr ug designation from the FDA for ELX-02 for the treatment of cystinosis, we may not be able to obtain orphan drug marketing exclusivity for ELX-02 or any of our other potential product candidates for other indications.

Regulatory authorities in some jurisdictions, including the United States and the European Union, may designate drugs for relatively small patient populations as orphan drugs.

25 unchanged sentences

These organizations also compete with us to attract qualified personnel, acquisitions and joint ventures candidates and for other collaborations.

Efforts to compete and the pursuit of activities of our competitors may impose unanticipated costs on our business, which would have a material adverse effect on our business, results of operations and financial condition.

Efforts to compete and the pursuit of activities of our competitors may impose unanticipated costs on our busin ess, which would have a material adverse effect on our business, results of operations and financial condition.

If we are unable to develop and commercialize our product candidates, our business will be adversely affected.

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As a result, our failure to satisfy the requirements of Section 404 on a timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could cause the market value of our common stock to decline.

Various rules and regulations applicable to public companies make it more difficult and more expensive for us to maintain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain coverage.

If we are unable to maintain adequate directors’ and officers’ liability insurance, our ability to recruit and retain qualified officers and directors, especially those directors who may be deemed independent for purposes of the Nasdaq stock market rules, will be significantly curtailed.

Various rules and regulations applicable to public com panies make it more difficult and more expensive for us to maintain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain coverage.

If we are unable to maintain adequ ate directors’ and officers’ liability insurance, our ability to recruit and retain qualified officers and directors, especially those directors who may be deemed independent for purposes of the Nasdaq stock m arket rules, will be significantly curtailed.

We are seeking to expand our business through strategic initiatives.

3 unchanged sentences

To manage effectively our current and future potential growth, we must continue to enhance and develop our global employee base, and our operational and financial processes.

Supporting our growth strategy will require significant capital expenditur es and management resources, including investments in research, development, sales and marketing, manufacturing and other areas of our operations.

The development or expansion of our business, any acquired business or any acquired or in-licensed products m ay require a substantial capital investment by us.

Supporting our growth strategy will require significant capital expenditures and management resources, including investments in research, development, sales and marketing, manufacturing and other areas of our operations.

The development or expansion of our business, any acquired business or any acquired or in-licensed products may require a substantial capital investment by us.

We may not have these necessary funds or they might not be available to us on acceptable terms or at all.

We may also seek to raise funds by selling shares of our capital stock, which could dilute current stockholders’ ownership interest in our C ompany, or securities convertible into our capital stock, which could dilute current stockholders’ ownership interest in our C ompany upon conversion.

We may also seek to raise funds by selling shares of our capital stock, or securities convertible into our capital stock, which could dilute current stockholders’ ownership interest in our Company.

Our business could be affected by litigation, government investigations and enforcement actions.

1 unchanged sentence

or foreign jurisdictions, including, without limitation, intellectual property, regulatory, product liability, environmental, whistleblower, Qui Tam, false claims, privacy, anti-kickback, anti-bribery, securities, commercial, employment, and other claims and legal proceedings which may arise from conducting our business.

Any of these actions or proceedings may result in significant costs, fines, penalties or imposition of burdensome restrictions on the Company, any of which could have a material adverse effect on our financial condition and result of operations.

Comprehensive tax reform bills could adversely affect our business and financial condition .

11 unchanged sentences

We urge our stockholders to consult with their legal and tax advisors with respect to the Tax Cuts and Jobs Act and the potential tax consequences of investing in or holding our common stock.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

As of June 30, 2018, we had U.S.

Our ability to use o ur net operating losses to offset future taxable income may be subject to certain limitations.

As of September 30, 2018, we had U.S.

federal and state NOL carryforwards of $77.2 million and $27.4 million, respectively, and federal research tax credit carryforwards of $0.7 million.

5 unchanged sentences

We may experience additional ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.

we have not completed our analysis, it is reasonably possible that our federal NOLs available to offset future taxable income could materially decrease.

This reduction will be offset by an adjustment to the existing valuation allowance for an equal and of fsetting amount.

Although we have not completed our analysis, it is reasonably possible that our federal NOLs available to offset future taxable income could materially decrease.

This reduction will be offset by an adjustment to the existing valuation allowance for an equal and offsetting amount.

Additionally, our state NOLs available to offset future state income could similarly decrease which would also be offset by an equal and offsetting adjustment to the existing valuation allowance.

Given the offsetting adjustments to the exi sting valuation allowance, any ownership change is not expected to have an adverse material effect on our Consolidated Financial Statements.

Finally, as of June 30, 2018, we had Israeli NOL carryforwards of $24.9 million, which carryforward indefinitely.

Given the offsetting adjustments to the existing valuation allowance, any ownership change is not expected to have an adverse material effect on our Consolidated Financial Statements.

Finally, as of September 30, 2018, we had Israeli NOL carryforwards of $24.9 million, which carryforward indefinitely.

Our ability to utilize our NOLs is dependent on attaining profitability sufficient to offset such available NOLs prior to their expiration.

20 unchanged sentences

These regulations became effective on April 1, 2016.

Moreover, in the future, Congress could enact legislation that further increases Medicaid drug rebates or other costs and charges associated with participating in the Medicaid Drug Rebate Program.

Legislative changes to the PPACA also remain possible and appear likely in the 115th U.S.

Congress under the Trump administration.

The issuance of regulations and coverage expansion by various governmental agencies relating to the Medicaid Drug Rebate Program has and will continue to increase our costs and the complexity of compliance, has been and will be time-consuming, and could have a material adverse effect on our results of operations.

Moreover, in the future, Congress could enact legislation that further increases Me dicaid drug rebates or other costs and charges associated with participating in the Medicaid Drug Rebate Program.

Legislative changes to the PPACA also remain possible and appear likely under the current administration.

The issuance of regulations and cove rage expansion by various governmental agencies relating to the Medicaid Drug Rebate Program has and will continue to increase our costs and the complexity of compliance, has been and will be time-consuming, and could have a material adverse effect on our results of operations.

Governments in countries where we operate have adopted or have shown significant interest in pursuing legislative initiatives to reduce costs of healthcare.

We expect that the implementation of current laws and policies, the amendment of those laws and policies in the future, as well as the adoption of new laws and policies, could have a material adverse effect on our industry generally and on our ability to maintain or increase our product sales or successfully commercialize our product candidates, or could limit or eliminate our future spending on development projects.

In many cases, these government

initiatives, even if enacted into law, are subject to future rulemaking by regulatory agencies.

In many cases, these government initiatives, even if enacted into law, are subject to future rulemaking by regulatory agencies.

Although we have evaluated these government initiatives and the impact on our business, we cannot know with certainty whether any such law, rule or regulation will adversely affect coverage and reimbursement of our product candidates, or to what extent, until such laws, rules and regulations are promulgated, implemented and enforced, which could sometimes take many years.

The announcement or adoption of regulatory or legislative pro posals could delay or prevent our entry into new markets, affect our reimbursement or sales in the markets where we are already selling our approved products, if any, and materially harm our business, financial condition and results of operations.

The announcement or adoption of regulatory or legislative proposals could delay or prevent our entry into new markets, affect our reimbursement or sales in the markets where we are already selling our approved products, if any, and materially harm our business, financial condition and results of operations.

We may be subject to numerous and varying privacy and security laws, and our failure to comply could result in penalties and reputational damage.

6 unchanged sentences

EU member states and other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations.

For example, the EC adopted the EU Data Protection Directive, as implemented into national laws by the EU member states, which imposed strict obligations and restrictions on the ability to collect, analyze, and transfer personal data, including health data from clinical trials and adverse event reporting.

For example, in May 2016, the European Union formally adopted the General Data Protection Regulation, or GDPR, which apply to all EU member states as of May 25, 2018 and replaces the former EU Data Protection Directive.

The regulation introduces new data protection requirements in the European Union and substantial fines for breaches of the data protection rules.

The GDPR must be implemented into national laws by the EU member states and will impose strict obligations and restrictions on the ability to collect, analyze, and transfer personal data, including health data from clinical trials and adverse event reporting.

Data protection authorities from different EU member states have interpreted the privacy laws differently, which adds to the complexity of processing personal data in the European Union, and guidance on implementation and compliance practices are often updated or otherwise revised.

Any failure to comply with the rules arising from the EU Data Protection Directive and related national laws of EU member states could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.

In May 2016, the European Union formally adopted the General Data Protection Regulation, which apply to all EU member states as of May 25, 2018 and replaces the current EU Data Protection Directive.

The regulation introduces new data protection requirements in the European Union and substantial fines for breaches of the data protection rules.

It will increase our responsibility and liability in relation to personal data that we process and we may be required to put in place additional mechanisms ensuring compliance with the new EU data protection rules.

The GDPR will increase our responsibility and liability in relation to personal data that we process and we may be required to put in place additional mechanisms ensuring compliance with EU data protection rules.

Security breaches, cyber-attacks, or other disruptions could expose us to liability and affect our business and reputation.

2 unchanged sentences

The secure maintenance of this information is critical to our operations and business strategy.

Some of this information could be an attractive target of criminal attack by third parties with a wide range of motives and expertise, including organized criminal groups, “hactivists,” patient groups, disgruntled current or former employees, and others.

Some of this information could be an attractive target of criminal attack by third parties with a wide range of motives and expertise, including organized criminal groups, “hacktivists,” patient groups, disgruntled current or former employees, and others.

Cyber-attacks are of ever-increasing levels of sophistication, and despite our security measures, our information technology and infrastructure may be vulnerable to such attacks or may be breached, including due to employee error or malfeasance.

We have implemented information security measures to protect patients’ personal information against the risk of inappropriate and unauthorized external use and disclosure.

We have implemented information security measures to protect patients’ personal

information against the risk of inappropriate and unauthorized external use and disclosure.

However, despite these measures, and due to the ever-changing information cyber-threat landscape, we may be subject to data breaches through cyber-attacks.

2 unchanged sentences

Like other companies in our industry, we have experienced attacks to our data and systems, including malware and computer viruses.

If our systems failed or were breached or disrupted, we could lose product sales, and suffer reputational damage and loss of customer confidence.

If our systems failed or were breached or di srupted, patient and other data and information may become compromised, we could lose product sales, and suffer reputational damage and loss of confidence by patients, investors and business partners .

Such incidents would result in notification obligations to affected individuals and government agencies, legal claims or proceedings, and liability under federal and state laws that protect the privacy and security of personal information.

Any one of these events could cause our business to be materially harmed and our results of operations would be adversely impacted.

Any one of these events , or similar events occurring through one of our vendors that maintain such information on our behalf, could cause our business to be materially harmed and our results of operations to be adversely impacted.

We expect to rely on third parties to conduct some or all aspects of our product manufacturing, protocol development, research and preclinical and clinical testing, and these third parties may not perform satisfactorily.

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We are highly dependent on principal members of our senior management, including Robert Ward, our Chief Executive Officer.

While we have entered into employment agreements or offer letters with each of our executive officers, any of them could leave our employment at any time, as all of our employees are “at will” employees.

While we have entered into employment agreements or offer letters with each of our executive officers, any of them could leave our em ployment at any time, as all of our employees are “at will” employees.

Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, will also be critical to our success.

Competition for skilled personnel is intense and the turnover rate can be high.

We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for individuals with similar skill sets.

Compet ition for skilled personnel is intense and the turnover rate can be high.

We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for individuals with similar sk ill sets.

In addition, failure to succeed in preclinical studies or clinical trials may make it more challenging to recruit and retain qualified personnel.

The inability to recruit or loss of the services of any executive, key employee, consultant or advisor may impede the progress of our research, development and commercialization objectives.

The inability to recruit or loss of the services of any executive, key employee, consultant or advis or may impede the progress of our research, development and commercialization objectives.

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

1 unchanged sentence

If we fail to adequately protect or enforce our intellectual property rights or secure rights to third party patents, the value of our intellectual property rights would diminish, and our business, competitive position and results of operations would suffer.

As of June 30, 2018, we had 36 pending patent applications.

However, the filing of a patent application does not mean that we will be issued a patent, or that any patent eventually issued will be as broad as requested in the patent application or sufficient to protect our technology.

Any modification required to a current patent application may delay the approval of such patent application which would have a material adverse effect on our business, results of operations and financial condition.

In addition, there are a number of factors that could cause our patents, if granted, to become invalid or unenforceable or that could cause our patent applications to not be granted, including known or unknown prior art, deficiencies in the patent application or the lack of originality of the technology.

As of September 30, 2018, we owned or licensed 17 issued patents and 36 pending patent applications in the U.S.

and abroad, not including U.S.

provisional applications.

However, with regard to the pending provisional applications, the filing of a patent application does not mean that we will be issued a patent, or that any patent eventually issued will be as broad as requested in the patent application or sufficient to protect our technology.

Any modification required to a currently pending patent application may delay the approval of such patent application which could have a material adverse effect on our business, results of operations and financial condition.

In addition, there are a number of factors that could cause our current or future issued patents to become invalid or unenforceable or that could cause our pending patent applications to not be granted, including known or unknown prior art, deficiencies in the patent application or lack of originality of the technology.

Our competitive position and future revenues will depend in part on our ability and the ability of our licensors and collaborators to obtain and maintain patent protection for our product candidates, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties.

We have filed U.S.

and international patent applications for process patents;

However, we cannot predict:

1 unchanged sentence

if and when patents will issue;

whether or not others will obtain patents claiming aspects similar to those covered by our licensed patents and patent applications;

whether or not others will obtain patents claiming aspects similar to those covered by our owned or licensed patents and patent applications;

whether we will need to initiate litigation or administrative proceedings, which may be costly, and whether we win or lose.

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Furthermore, the life of our patents is limited.

The patents we hold, and the patents that may be issued in the future based on patent applications from the patent families, relating to our lead product candidate are expected to expire between 2031 and 2037 depending on any extensions of term for which we may be eligible that we may be granted.

The patents we hold, and the patents that may be issued in the future based on currently pending patent applications, relating to our lead product candidate are expected to expire between 2031 and 2038.

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 will be harmed.

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and other countries.

Such proceedings include re-exam inations, inter partes reviews, post-grant reviews and interference proceedings before the U.S.

Such proceedings include re-examinations, inter partes reviews, post-grant reviews and interference proceedings before the U.S.

Patent and Trademark Office, as well as opposition proceedings before the European Patent Office and other non-U.S.

patent offices.

Litigation may be required t o enforce, defend or obtain our patent and other intellectual property rights.

Any administrative proceeding or litigation could require a significant commitment of our resources and, depending on outcome, could adversely affect the scope, validity or enfo rceability of certain of our patent or other proprietary rights.

Litigation may be required to enforce, defend or obtain our patent and other intellectual property rights.

Any administrative proceeding or litigation could require a significant commitment of our resources and, depending on outcome, could adversely affect the scope, validity or enforceability of certain of our patent or other proprietary rights.

In addition, our business requires using sensitive technology, techniques and proprietary compounds that we protect as trade secrets.

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Any costs incurred in connection with such events or the inability to develop or sell our products may have a material adverse effect on our business, results of operations and financial condition.

We rely on confidentiality agreements that could be breached and may be difficult to enforce which could have a materi al adverse effect on our business and competitive position.

We rely on confidentiality agreements that could be breached and may be difficult to enforce which could have a material adverse effect on our business and competitive position.

Our policy is to enter agreements relating to the non-disclosure of confidential information with third parties, including our contractors, consultants, advisors and research collaborators, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees and consultants while we employ them.

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Since October 2000, there have been increasing occurrences of terrorist violence in the region.

Ongoing and revived hostilities or other Israeli political or economic factors, such as, an interruption of operations at the Tel Aviv airport, could prevent or delay shipments of our compounds or products.

If continued or resumed, these hostilities may negatively affect business conditions in Israel in general and our business in particular.

In the event that hostilities disrupt the ongoing operation of our facilities or the airports and seaports on which we depend to import and export our supplies and product candidates, our operations may be materially adversely affected.

In addition, since 2010 political uprisings and conflicts in various countries in the Middle East, including Egypt and Syria, are affecting the political stability of those countries and the region in general .

It is not clear h ow this instability will develop and how it will affect the political and security situation in the Middle East.

Ongoing and revived hostilities or other Israeli political or economic factors, could negatively affect business conditions in Israel in general and our business in particular.

In addition, since 2010 political uprisings and conflicts in various countries in the Middle East are affecting the political stability of those countries and the region in general .

It is not clear how this instability will develop and how it will affect the political and security situation in the Middle East.

This instability has raised concerns regarding security in the region and the potential for armed conflict.

In Syria, a country bordering Israe l, a civil war has been in progress for several years .

In addition, it is widely believed that Iran, which has previously threatened to attack Israel, has been stepping up its efforts to achieve nuclear capabilit ies .

Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza and Hezbollah in Lebanon.

Additionally, violent jihadist group s , are involved in hostiliti es in Iraq and Syria.

Additionally, various group s are involved in hostiliti es in the region .

Although these groups’ activities have not directly affected the political and economic conditions in Israel, a stated purpose is to take control of the Middle East, including Israel.

The tension between Israel and Iran and/or these other groups may escalate in the future and t urn violent, which could affect the Israeli economy in general and us in particular.

Any potential future conflict could also include missile strikes against parts of Israel, including our offices and facilities.

The tension between Israel and t h ese other groups may escalate in the future and turn violent, which could affect the Israeli economy in general and us in particular.

Such instability may lead to deterioration in the political and trade relationships that exist between Israel and certain other countries.

Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions, could harm our results of operation s and could make it more difficult for us to raise capital.

Parties with whom we do business may sometimes decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order to me et our business partners face to face.

Several countries, principally in the Middle East, still restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continues or increases.

Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions, could harm our results of operations and could make it more difficult for us to raise capital.

Similarly, Israeli companies are limited in conducting business with entities from several countries.

For instance, in 2008, the Israeli legislature passed a law forbid ding any investments in entities that transact business with Iran.

In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perfor m their commitments under those agreements pursuant to force majeure provisions in such agreements.

In addition, the political and security situation in Israel may result in parties with whom we have agreements involving per formance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.

Our insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East or for any resulting disruption in our operations.

Although the Israeli government has in the past covered the reinstatement value of direct damages that were caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for damages incurred and the government may cease providing such coverage or the coverage might not suffice to cover potential damages.

Although the Israeli government has in the past covered the reinstatement value of direct damages that were caused by terrorist attacks or acts of war, we cannot provide assurance that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for damages incurred and the government may cease providing such coverage or the coverage might not suffice to cover potential damages.

Any losses or damages incurred by us could have a material adverse effect on our business.

Any armed conflicts or political instability in the region would likely negatively affect business conditions generally and could harm our results of operations.

Any armed conflicts or political instability in the region would likely negatively affect business conditions generally and our business in particular.

Furthermore, in the past, Israel and Israeli companies have been subjected to economic boycotts.

Several countries still restrict business with Israel and with Israeli companies.

These restrictive laws and policies may have an adverse impact on our operating results, financial conditions or the expansion of our business.

These restrictive laws and policies, even though we are a U.S.-based company, may have an adverse impact on our operating results, financial conditions or the expansion of our business.

Our research operations may be disrupted by the obligations of our personnel to perform military service which could have a material adverse effect on our business.

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It is possible that there will be similar large-scale military reserve duty call-ups in the future.

Our operations could be disrupted by the absence of a significant number of our officers, directors, employees and consultants related to military service.

Such disruption could materially adversely affect our business and operations.

Our operations could be disrupted by the absence of a significant number of our Israeli personnel military service.

Such disruption could adversely affect our business and research operations.

Additionally, the absence of a significant number of the employees of our Israeli suppliers and contractors related to military service or the absence for extended periods of one or more of their key employees for military service may disrupt their operations.

Because a certain portion of our expenses are in curred in New Israeli Shekels, or NIS, our results of operations may be seriously harmed by currency fluctuations and inflation.

Because a certain portion of our expenses are incurred in New Israeli Shekels, or NIS, our results of operations may be seriously harmed by currency fluctuations and inflation.

We report our financial statements in U.S.

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We received Israeli government grants for our research and development activities and programs.

The terms of such grants may require us, in the future, to pay royalties and to satisfy specific conditions if and to the extent we receive future royalties or in order to complete the sale of such grant-based technologies and programs.

The terms of such grants may require us, in the future, to pay royalties and to satisfy specific conditions if and to the extent we receive future

royalties or i n order to complete the sale of such grant-based technologies and programs.

We may be required to pay penalties in addition to payment of the royalties.

Our research and development efforts have been financed, in part, through royalty-bearing grants from the Israel Innovation Authority, or IIA.

As of June 30, 2018, we have received the aggregate amount of approximately $2.6 million from the IIA for the development of our technologies.

To date, we have received the aggregate amount of approximately $2.6 million from the IIA for the development of our technologies.

With respect to such grants we are committed to pay certain royalties (including accrued LIBOR interest) up to $2.7 million.

We are required to comply with the requirements of the Israeli Encouragement of Research, Development and Technological Innovation in the Industry Law, 5744-1984, as amended, and related regulations, or the Research Law, with respect to these past grants.

If we fail to comply with the Research Law, we may be required to refund certain grants previously received and/or to pay interest and penalties and we may become subject to criminal charges.

If we fail to comply with the R&D Law, we may be required to refund certain grants previously received and/or to pay interest and penalties and we may become subject to criminal charges.

We have not commenced the payment obligation of the royalties and have a contingent obligation with respect to royalty-bearing participation received or accrued, to include LIBOR interest, in the amount of approximately $2.7 million .

In addition, with respect to such grants we are obligated to pay royalties at a rate of 3% to 6% from the revenues generated from the sale of product (as well as revenue from associated services) developed using the IIA grants.

A recent amendment to the Law for the Encouragement of Research, Development and Technological Innovation in the Industry, 1984-5744, or the R&D Law, mandated the formation of the IIA to replace the Israel Office of the Chief Scientist.

Pursuant to this amendment, the IIA may establish new guidelines and promulgate new regulations under the R&D Law.

These changes in the structure of the IIA and the R&D Law may affect our existing or future IIA programs and related obligations.

At this stage, we cannot predict what changes, if any, the new authority may make.

The R&D Law and the regulations promulgated thereunder provide that when a company develops know-how, technology or products using IIA grants, the terms of these grants and the R&D Law restrict the transfer of such know-how, and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside of Israel, without the prior approval of the IIA.

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These restrictions and requirements for payment may impair our ability to sell our technology assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology outside of Israel.

Furthermore, the consideration available to our stockholders in a transaction involving the transfer outside of Israel of technology or know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA.

Furthermore, the consideration available to our stockholders in a transaction involving the transfer outside of Israel of technology or know-how developed with IIA funding may be reduced by any amounts that we are required to pay to the IIA.

Our obligations and limitations pursuant to the R&D Law are not limited in time and may not be terminated by us at will.

As of the date hereof, we have not been required to pay any royalties with respect to the IIA grants.

We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely a ffect our business.

We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.

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, depending on the jurisdiction, without the employee retaining any rights.

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The Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee (the “Committee”), a body constituted under the Patent Law, shall determine whether the employee is entitled to remuneration for his or her inventions.

Recent decisions by the Committee and the Israeli Supreme Court have created uncertainty in this area, as the Israeli Supreme Court held that employees may be entitled to remuneration for their service inventions despite having specifically waived any such rights.

Further, the Committee has not yet determined the method for calculating this Committee-enforced remuneration.

Although our employees have agreed that any rights related to their inventions are owned exclusively by us, we may face claims demanding remuneration in consideration for such acknowledgement.

As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to litigate such claims, which could negatively affect our business.

Risks Related to Our Common Stock

Previous decisions by the Committee have created uncertainty in this area regarding whether the right to receive remuneration for service inventions can be voluntarily waived by an employee and whether such waiver is enforceable.

In addition, the Committee determined that even if such right to receive compensation and royalties for service inventions may be waived, the waiver should be specific.

Subsequent court cases have not provided significant clarity on these matters.

Risks Related to Our Common S tock

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.

Directors, executive officers, principal stockholders and affiliated entities own a significant percentage of our capital stock, and they may make decisions that an investor may not consider to be in the best interests of our stockholders.

As of June 30, 2018, our directors, executive officers, principal stockholders and affiliated entities beneficially own, in the aggregate, approximately 52% of our common stock, giving effect to options, convertible notes and other derivative securities that are held by such persons.

Our Directors, executive officers, principal stockholders and affiliated entities own a significant percentage of our capital stock, and they may make decisions that an investor may not consider to be in the best interests of our stockholders.

Our directors, executive officers, principal stockholders and affiliated entities beneficially own, in the aggregate, a significant percentage of our common stock, giving effect to options and other derivative securities that are held by such persons.

As a result, if some or all of them acted together, they would have the ability to exert substantial influence over the election of our board of directors and the outcome of issues requiring approval by our stockholders.

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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 the Share Ownership and Option Plan (2013), or th e 2013 Plan, the 2008 Equity Incentive Plan, or the 2008 Plan, and together with the 2013 Plan, the Prior Plans, and the 2018 Equity Incentive Plan, or the 2018 Plan, our management is authorized to grant share options and other equity-based awards to our employees, directors and consultants.

Pursuant to the 2013 Plan, the 2008 Plan, and the 2018 Plan, our management is authorized to grant share options and other equity-based awards to our employees, directors and consultants.

The 2018 Plan became effective on April 20,2018.

As of June 30, 2018, individuals held share optio ns to purchase an aggregate of 3 , 870 , 237 shares of common stock .

If our board of directors elects to increase the number of shares available for future grant by the maximum amount each year, our stockholders may experience additional dilution, which could cause our share price to fall.

As of September 30, 2018, individuals held options to purchase an aggregate of 3,611,400 shares of our common stock.

Unregistered Sales of Equity Securities and Use of Proceeds

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What changed 10-Q

Item 1A. Risk Factors