What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-29 compared with 2023-03-27 · 140 added, 230 removed, 129 unchanged (74% of the section changed)

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dollars, unless otherwise noted.

have the following two business units:

ImmixBio is focused

on developing Tissue Specific Therapeutics targeting solid tumors and immune-dysregulated diseases.

As of February 2023, 19 patients with

advanced solid tumors were treated with IMX-110, ImmixBio’s lead candidate.

Our majority-owned

subsidiary, Nexcella, Inc., is engaged in the discovery and development of novel

cell therapies for hematologic malignancies (blood cancers) and other indications.

As of February 2023, 42 patients with relapsed/refractory

multiple myeloma (90% overall response rate at therapeutic dose) and 5 relapsed/refractory light chain (AL) amyloidosis patients (100%

organ response, 100% complete response rate) have been treated with next-generation CAR-T NXC-201.

Immix Biopharma, Inc.

is a clinical-stage biopharmaceutical company focused

on the application of CAR-T in light chain (AL) Amyloidosis and autoimmune disease.

Our lead cell therapy candidate is FDA IND cleared

CAR-T NXC-201, currently being evaluated in our ongoing Phase 1b/2a NEXICART-1 (NCT04720313) clinical trial.

Based on early clinical data,

we believe NXC-201 has the potential to be the world’s first “Single-Day CRS” CAR-T (CRS median onset day 1, median

duration 1 day), enabling the potential for a faster return home for patients.

NXC-201 has been awarded Orphan Drug Designation (ODD)

by the FDA in both AL Amyloidosis and multiple myeloma, and ODD by the European Commission (EMA) in AL Amyloidosis.

inception, we have devoted substantially all of our resources to developing product and technology rights, conducting research and development,

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and License Agreement with Hadasit and BIRAD

On December 8, 2022, Nexcella

entered into the Agreement with the Licensors pursuant to which the Licensors granted to Nexcella an exclusive, worldwide, royalty-bearing

license in the Territory to an invention entitled “Anti-BCMA CAR-T cells to target plasma cell” to develop, manufacture, have

manufactured, use, market, offer for sale, sell, have sold, export and import Licensed Product.

Pursuant to the Agreement, Nexcella paid

the Licensors an upfront fee of $1,500,000 in December 2022.

Additional quarterly payments totaling approximately $13.0 million are due

through September 2026 along with an annual license fee of $50,000.

Nexcella has agreed to pay royalties to the Licensors equal to 5%

of Net Sales during the Royalty Period.

Nexcella shall pay sales milestone payments of up to $20 million for Net Sales exceeding $700 million and Nexcella has committed to funding

NXC-201 clinical trials in Israel over 4 years for an estimated total cost of approximately $13 million, spread on a quarterly basis over

that period, which Nexcella believes will generate clinical trial data owned by Nexcella.

The term of the Agreement commenced on December

8, 2022 and, unless earlier terminated pursuant to the terms thereof, shall continue in full force and effect until the later of the expiration

of the last Valid Claim under a Licensed Patent or a Joint Patent or Exclusivity Right covering a Licensed Product or the expiration of

a continuous period of 15 years during which there shall not have been a First Commercial Sale of any Licensed Product in any country

in the world.

Licensors may terminate the Agreement immediately if Nexcella or its affiliates or sublicensees commences an action in which

it challenges the validity, enforceability or scope of any of the Licensed Patents or Joint Patents.

In addition, either party may terminate

the Agreement if the other party materially breaches the Agreement and fails to cure such breach within 30 days.

Additionally, Licensors

may terminate the Agreement if Nexcella becomes insolvent or files for bankruptcy.

On January 12, 2023, Nexcella

entered into share purchase agreements with certain accredited investors for their purchase of an aggregate 100,152 shares of Nexcella’s

common stock at a purchase price of $6.49 per share, for gross proceeds of approximately $650,000.

In addition, our Chief Executive Officer

and Chief Financial Officer collectively purchased 23,112 shares of Nexcella’s common stock for an aggregate purchase price of $150,000.

As a result of the foregoing offering, as of January 12, 2023, we owned 98% of Nexcella.

On March 22, 2023, we entered into the Sales Agreement with the Sales Agent

pursuant to which we may offer and sell, from time to time, through the Sales Agent, shares of our common stock having an aggregate offering

price of up to $5,000,000, subject to the terms and conditions set forth in the Sales Agreement.

We will pay the Sales Agent a fixed commission

rate of 3.75% of the aggregate gross proceeds from the sale of the shares of our common stock pursuant to the Sales Agreement.

paid an expense deposit of $15,000 to the Sales Agent, which will be applied against the actual out-of-pocket accountable expenses.

have agreed to reimburse the Sales Agent for all expenses related to the offering including, without limitation, the fees and expenses

of the Sales Agent’s legal counsel up to $50,000, and shall reimburse the Sales Agent, upon request, for such costs, fees and expenses

in an amount not to exceed $7,500 on a quarterly basis for the first three fiscal quarters of each year and $10,000 for the fiscal fourth

quarter of each year.

The offering pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all of the shares

of common stock subject to the Sales Agreement, and (ii) termination of the Sales Agreement as permitted therein.

We may terminate

the Sales Agreement in our sole discretion at any time by giving ten days’ prior notice to the Sales Agent.

The Sales Agent may

terminate the Sales Agreement under the circumstances specified in the Sales Agreement and in its sole discretion at any time by giving

ten days’ prior notice to us.

In addition, the Sales Agreement may be terminated upon mutual agreement by us and the Sales Agent.

COVID-19 Pandemic and its Impacts on Our Business

March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic.

This pandemic could result in difficulty

securing clinical trial site locations, CROs, and/or trial monitors and other critical vendors and consultants supporting our trial.

These situations, or others associated with COVID-19, could cause delays in our clinical trial plans and could increase expected costs,

all of which could have a material adverse effect on our business and financial condition.

At the current time, we are unable to quantify

the potential effects of this pandemic on our future consolidated financial statements.

December 8, 2022, Nexcella entered into the Agreement with the Licensors pursuant to which the Licensors granted to Nexcella an exclusive,

worldwide, royalty-bearing license in the Territory to an invention entitled “Anti-BCMA CAR-T cells to target plasma cell”

to develop, manufacture, have manufactured, use, market, offer for sale, sell, have sold, export and import Licensed Product.

to the Agreement, Nexcella paid the Licensors an upfront fee of $1,500,000 in December 2022.

Additional quarterly payments totaling approximately

$13.0 million are due through September 2026 along with an annual license fee of $50,000.

Nexcella has agreed to pay royalties to the

Licensors equal to 5% of Net Sales during the Royalty Period.

addition, Nexcella shall pay sales milestone payments of up to $20 million for Net Sales exceeding $700 million and Nexcella has committed

to funding NXC-201 clinical trials in Israel over 4 years for an estimated total cost of approximately $13 million, spread on a quarterly

basis over that period, which Nexcella believes will generate clinical trial data owned by Nexcella.

The term of the Agreement commenced

on December 8, 2022 and, unless earlier terminated pursuant to the terms thereof, shall continue in full force and effect until the later

of the expiration of the last Valid Claim under a Licensed Patent or a Joint Patent or Exclusivity Right covering a Licensed Product

or the expiration of a continuous period of 15 years during which there shall not have been a First Commercial Sale of any Licensed Product

in any country in the world.

Licensors may terminate the Agreement immediately if Nexcella or its affiliates or sublicensees commences

an action in which it challenges the validity, enforceability or scope of any of the Licensed Patents or Joint Patents.

either party may terminate the Agreement if the other party materially breaches the Agreement and fails to cure such breach within 30

Additionally, Licensors may terminate the Agreement if Nexcella becomes insolvent or files for bankruptcy.

February 2024, we conducted an underwritten public offering of 5,535,055 shares of common stock at the public offering price is $2.71

per shares, for the net proceeds, after underwriter discounts and offering expenses, of approximately $13,529,999.

Pursuant to the underwriting

agreement, we granted the underwriter a 30-day over-allotment option to purchase up to an additional 783,970 shares of our common stock,

which was exercised in full on March 1, 2024 for the net proceeds, after underwiring discounts and offering expenses, of $1,954,594.

of Operations

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expenses incurred in both periods were related to salaries, patent maintenance costs and general accounting and other general consulting

expenses, which were higher for the year ended December 31, 2022 due to the Company becoming a fully reporting public company.

expenses, which were higher for the year ended December 31, 2023 due to increased professional fees of $516,271, increased investor relations

services of $1,041,458, of which $622,423 was non-cash from shares issued for services, increased compensation of $203,274, and increased

stock-based compensation of $1,419,217 from additional equity awards issued to the officers, directors and consultants.

and Development Expenses

and development expenses were $8,735,031 for the year ended December 31, 2023 compared to $4,195,778 for the year ended December 31,

increased research and development expenses during the year ended December 31, 2022, as compared to the year ended December 30, 2021,

were related to our ongoing Phase 1b/2a clinical trial, including, but not limited to, contract research organization (“CRO”)

and related costs for maintaining and treating patients in the clinical trial.

We were able to increase spending on research and development

as a result of closing the IPO in December 2021, and we expect to incur increased research and development costs in the future as our

product development activities expand.

In addition, the Company paid $1,500,000 for an upfront license fee in connection with the Agreement.

in Fair Value of Derivative Liability

The change in fair

value of derivative liability was $0 for the year ended December 31, 2022 compared to $22,759,829 for the year ended December 31, 2021.

The derivative liability related to the probability of a “Qualified Financing” (as defined in our convertible notes), was

reclassified to equity in connection with the automatic conversion of the convertible notes to shares of our common stock in connection

with our initial public offering (“IPO”) in December 2021.

Loss on Debt Extinguishment

In December 2021, in connection with our IPO, our convertible notes along

with the corresponding accrued interest, were automatically converted into an aggregate of 5,633,689 shares of our common stock.

result of the conversion, we recorded a loss on debt extinguishment of $86,170.

expense was $497 for the year ended December 31, 2022 compared to $179,853 for the year ended December 31, 2021.

Interest expense in

the prior period was related to interest accrued on our convertible notes payable bearing interest at rates from the applicable federal

rate to 6% per annum, all of which were converted to shares of our common stock in connection with our IPO in December 2021.

increased research and development expenses relate to our ongoing Phase 1b/2a clinical trial, including, but not limited to, contract

research organization (“CRO”) and related costs for maintaining and treating patients in the clinical trial.

to increase spending on research and development in 2023 as a result of our increased fundings from the various equity offerings.

income was $572,006 for the year ended December 31, 2023 compared to $0 interest income for the year ended December 31, 2022.

income in the current period was related to interest earned on investments in a money market fund.

for Income Taxes

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taxes relating to our Australian subsidiary.

primary use of cash is to fund operating expenses, which consist of research and development expenditures and various general and administrative

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in

our outstanding accounts payable, accrued expenses and prepaid expenses.

of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are

unable to estimate the exact amount of our operating capital requirements.

Our future funding requirements will depend on many factors,

including, but not limited to:

scope, timing, progress and results of discovery, pre-clinical development, laboratory testing and clinical trials for our product

costs of manufacturing our product candidates for clinical trials and in preparation for regulatory approval and commercialization;

extent to which we enter into collaborations or other arrangements with additional third parties in order to further develop our

product candidates;

costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending

intellectual property-related claims;

costs and fees associated with the discovery, acquisition or in-license of additional product candidates or technologies;

needed to attract and retain skilled personnel;

costs associated with being a public company;

costs required to scale up our clinical, regulatory and manufacturing capabilities;

costs of future commercialization activities, if any, including establishing sales, marketing, manufacturing and distribution capabilities,

for any of our product candidates for which we receive regulatory approval;

if any, received from commercial sales of our product candidates, should any of our product candidates receive regulatory approval.

will need additional funds to meet our operational needs and capital requirements for clinical trials, other research and development

expenditures, and general and administrative expenses.

We currently have no credit facility or committed sources of capital.

such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity

offerings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangements, other

collaborations, strategic alliances and licensing arrangements.

To the extent that we raise additional capital through the sale of equity

or convertible debt securities, your ownership interest may be diluted, and the terms of these securities may include liquidation or

other preferences that adversely affect your rights as a common stockholder.

If we raise additional funds through collaborations, strategic

alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies,

future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us.

unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit,

reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product

candidates that we would otherwise prefer to develop and market ourselves.

Liquidity and Capital Resources

Sources of Liquidity

We do not have any approved products for commercial sale and have never generated revenue from product sales and

have incurred significant net losses since our inception and expect to continue to incur net operating losses for the foreseeable future.

We do not expect to receive any revenue from any product candidates that we develop unless and until we obtain regulatory approval and

commercialize our product candidates or enter into collaborative arrangements with third parties.

We currently have no credit facility

or committed sources of capital.

Material Cash Requirements

Our primary use of cash and cash equivalents is to fund operating expenses, which consist of clinical research and

development expenses, manufacturing expenses, legal and compliance expenses, compensation and related expenses, and general overhead costs.

Cash and cash equivalents used to fund operating expenses is impacted by the timing of when we pay or prepay these expenses.

our expenses to increase in connection with our ongoing activities, particularly as we expand our clinical programs, continue the research

and development of, and seek marketing approval for our product candidates.

In addition, if we obtain marketing approval for any of our

product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

of December 31, 2023, we had total assets of approximately $19.9 million and working capital of approximately $16.1 million.

of December 31, 2023, our liquidity included approximately $17.5 million of cash and cash equivalents.

In February and March 2024,

we conducted an underwritten public offering of 6,319,025 shares of our common stock, inclusive of the underwriter’s exercise

in full of its over allotment option, at $2.71 per share, for the net proceeds of approximately $15.5 million, after underwriting

discounts and offering expenses.

We believe that our cash and cash equivalents on hand as of the date of this report will be

sufficient to fund our planned operations over the 12-month period following the date of this report;

however, there can be no

assurance we will not need additional capital sooner.

In addition, we believe that we will need additional capital to continue our

planned operations beyond the 12-month period following the date of this report.

We intend to seek additional funds through various

financing sources, including the sale of our equity and debt securities, licensing fees for our product candidates and technology

and joint ventures with industry partners.

In addition, we will consider alternatives to our current business plan that may enable

us to achieve revenue producing operations and meaningful commercial success with a smaller amount of capital.

However, there can be

no guarantees that such funds will be available on commercially reasonable terms, if at all.

If such financing is not available on

satisfactory terms, we may be unable to further pursue our business plan and we may be unable to continue operations.

the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be

diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common

Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting

our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third

parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates,

or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings

or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future

commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market

continuation of the Company as a going concern is dependent upon its ability to obtain continued financial support from its stockholders,

necessary equity financing to continue operations and the attainment of profitable operations.

In January 2024,

the Company entered into a long-term operating lease agreement for biopharmaceutical manufacturing space in California

under a non-cancelable operating lease that expires in December 2033.

Under the terms of the lease we expect to make total lease

payments of $1.6 million through December 2033.

We enter into contracts in the normal course of business with third-party contract organizations

for preclinical and clinical studies, manufacture and supply of our preclinical and clinical materials and providing other services and

products for operating purposes.

Contracts for preclinical and clinical studies and other services generally provide for termination following

a certain period after notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.

do not have any long-term manufacturing and supply agreements with our third-party contract manufacturers but enter into specific contracts

on an as needed basis for individual batch production runs.

used in operating activities

cash used in operating activities was $11,371,438 for the year ended December 31, 2023 and $7,408,303 for the year ended December 31,

2021 and primarily included CRO, clinical site costs and related logistics.

Net cash used for the year ended December 31, 2023 was primarily related to our net loss of $15,595,522 offset by non-cash items of stock-based compensation expense of $2,565,708

and depreciation expense of $5,468.

Operating activities also included an increase in accounts payable of $2,434,467, an increase in the

tax receivable of $893,401, and a decrease in prepaid expenses of $111,842.

Net cash used for the year ended December 31, 2022, was primarily

related to our net loss of $8,229,713 offset by non-cash items of stock-based compensation expense of $624,069 and depreciation expense

Operating activities also included an increase in accounts payable of $1,131,736 and an increase in the tax receivable of $236,384,

offset by an increase in prepaid expenses of $691,047 and decrease in accrued interest of $9,099.

used in investing activities

cash used by investing activities was $0 for the year ended December 31, 2022 and $802 for the year ended December 31, 2021.

cash used in investing activities was $52,089 for the year ended December 31, 2023 and $0 for the year ended December 31, 2022.

equipment during the year ended December 31, 2023.

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Net cash provided by financing activities in 2023 was primarily related to $9,934,153 in net proceeds from the issuance of

shares of our common stock pursuant to the exercise of the underwriter’s overallotment option to purchase additional shares of

our common stock in connection with our IPO completed in December 2021 and funds of $475,000 received by our subsidiary, Nexcella,

in connection with a private placement offering.

We received $18,648,934 in net proceeds from the issuance of our shares of common stock

pursuant to our initial public offering during the year ended December 31, 2021, along with $200,000 in proceeds from convertible notes

The continuation of the Company as a going concern is dependent upon its

ability to obtain continued financial support from its stockholders, necessary equity financing to continue operations and the attainment

of profitable operations.

As of December 31, 2022, we have incurred an accumulated deficit of $37,985,247 and have not yet generated any

revenue from operations.

Additionally, management anticipates that its cash on hand will be sufficient to fund its planned operations

for at least 12 months from the filing date of this Annual Report on Form 10-K.

will have additional capital requirements going forward and may need to seek additional financing, which may not be available to us on

acceptable terms, if at all.

shares of our common stock and warrants in our August 2023 private placement and $5,438,970 in net proceeds from the sale of shares of

our common stock pursuant to our ATM facilities.

Accounting Policies

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estimates used in the preparation of our consolidated financial statements.

Instruments - We evaluated our convertible notes to determine if those contracts or embedded components of those contracts qualified

as derivatives to be separately accounted for in accordance with Accounting Standards Codification (“ASC”) 815, Derivatives

and Hedging .

The result of this accounting treatment is that the fair value of the embedded derivative is marked to market each balance

sheet date and recorded as a liability.

In the event that the fair value is recorded as a liability, the change in fair value is recorded

in the statements of operations and comprehensive loss as other income or expense.

Upon conversion or exercise of a derivative instrument,

the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other

embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments

are accounted for as a single, compound derivative instrument.

determined that the convertible notes contain embedded features that provide the noteholders with multiple settlement alternatives.

of these settlement features provide the noteholders the right to receive cash or a variable number of shares upon the completion of

a capital raising transaction, change of control or default by us, which are referred to as “redemption features.”

Compensation - We measure all stock-based awards granted based on their estimated fair value on the date of the grant and recognize

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Dividend rate

establishing a public market for the trading of our common stock and due to a lack of company-specific historical and implied volatility

data, we based the estimate of expected stock price volatility on the historical volatility of a representative group of publicly traded

companies for which historical information was available.

The historical volatility was generally calculated based on a period of time

commensurate with the expected term assumption.

We used the simplified method to calculate the expected term for options granted to employees

and directors.

We did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected

term and used the contractual term since the stock options were not issued at-the-money.

For options granted to non-employees, we utilized

the contractual term.

The risk-free interest rate was based on a U.S.

treasury instrument whose term is consistent with the expected

term of the stock options.

The expected dividend yield was assumed to be zero, as we had never paid dividends and do not have current

plans to pay any dividends on our common stock.

Value of Common Stock

to establishing a public market for our common stock, the estimated fair value of our common stock had been determined by our board of

directors as of the date of each option grant, with input from management, considering our most recently available third-party valuations

of common stock, and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant

and which may have changed from the date of the most recent valuation through the date of the grant.

valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting

and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation .

Our common stock valuations

were prepared using a hybrid method that incorporated elements of both a probability-weighted expected return method (“PWERM”)

and an option pricing method (“OPM”).

OPM is based on the Black-Scholes option pricing model, which allows for the identification of a range of possible future outcomes.

OPM treats common stock and convertible instruments as call options on the total equity value of a company, with exercise prices based

on the value thresholds at which the allocation among the various holders of a company’s securities changes.

A discount for lack

of marketability of the common stock is applied to arrive at an indication of value for the common stock.

involves a forward-looking analysis of the possible future outcomes of the enterprise.

This method is particularly useful when discrete

future outcomes can be predicted at a relatively high confidence level with a probability distribution.

Discrete future outcomes considered

under the PWERM include an initial public offering, as well as non-initial public offering market-based outcomes.

Determining the fair

value of the enterprise using the PWERM requires the Company to develop assumptions and estimates for both the probability of an initial

public offering liquidity event and stay private outcomes, as well as the values the Company expects those outcomes could yield.

to establishing a public trading market of our capital stock, our board of directors exercised reasonable judgment and considered a number

of objective and subjective factors to determine its estimate of the fair value of our common stock, including changes in the following

factors between the date of the March 31, 2021 valuation and the grant date:

business, financial condition and results of operations, including related industry trends affecting our operations;

likelihood of achieving a liquidity event, such as an initial public offering or sale of our company, given prevailing market conditions;

lack of marketability of our common stock;

market performance of comparable publicly traded companies;

and global economic and capital market conditions and outlook.

assumptions underlying our board of directors’ valuations represented our board’s best estimates, which involved inherent

uncertainties and the application of our board’s judgment.

As a result, if factors or expected outcomes had changed or our board

of directors had used significantly different assumptions or estimates, our equity-based compensation expense could have been materially

Research and Development Costs

development costs are expensed as incurred.

Research and development costs consist primarily of clinical research fees paid to

consultants and outside service providers, other expenses relating to design, development and testing of our

therapy candidates, and for license and milestone costs related to in-licensed products and technology.

Costs incurred in obtaining

technology licenses are charged to research and development expense if the technology licensed has not reached commercial

feasibility and has no alternative future use.

Such licenses purchased by us require substantial completion of research

and development, regulatory and marketing approval efforts in order to reach commercial feasibility and has no alternative future

Clinical trial

costs are a component of research and development expenses.

The Company estimates expenses incurred for clinical trials that are in

process based on services performed under contractual agreements with clinical research organizations and actual clinical

investigators.

Included in the estimates are (1) the fee per patient enrolled as specified in the clinical trial contract with each

institution participating in the clinical trial and (2) progressive data on patient enrollments obtained from participating clinical

trial sites and the actual services performed.

Changes in clinical trial assumptions, such as the length of time estimated to enroll

all patients, rate of screening failures, patient drop-out rates, number and nature of adverse event reports, and the total number

of patients enrolled can impact the average and expected cost per patient and the overall cost of the clinical trial.

monitor the progress of the trials and their related activities and adjust expense accruals, when applicable.

Adjustments to

accruals are charged to expense in the period in which the facts give rise to the adjustments become known.

and Development Costs

and development costs are expensed as incurred.

Research and development costs consist primarily of clinical research fees paid to consultants

and outside service providers, other expenses relating to design, development and testing of our therapy candidates, and for license

and milestone costs related to in-licensed products and technology.

Costs incurred in obtaining technology licenses are charged to research

and development expense if the technology licensed has not reached commercial feasibility and has no alternative future use.

Such licenses

purchased by us require substantial completion of research and development, regulatory and marketing approval efforts in order to reach

commercial feasibility and has no alternative future use.

trial costs are a component of research and development expenses.

The Company estimates expenses incurred for clinical trials that are

in process based on services performed under contractual agreements with clinical research organizations and actual clinical investigators.

Included in the estimates are (1) the fee per patient enrolled as specified in the clinical trial contract with each institution participating

in the clinical trial and (2) progressive data on patient enrollments obtained from participating clinical trial sites and the actual

services performed.

Changes in clinical trial assumptions, such as the length of time estimated to enroll all patients, rate of screening

failures, patient drop-out rates, number and nature of adverse event reports, and the total number of patients enrolled can impact the

average and expected cost per patient and the overall cost of the clinical trial.

We monitor the progress of the trials and their related

activities and adjust expense accruals, when applicable.

Adjustments to accruals are charged to expense in the period in which the facts

give rise to the adjustments become known.

Accounting Pronouncements

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a smaller reporting company, we are not required to provide the information required by this item.

As a smaller reporting company, we

are not required to provide the information required by this item.

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 7. Management’s Discussion and Analysis