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Item 7. Management’s Discussion and Analysis

2023-03-30 compared with 2022-03-29 · 272 added, 147 removed, 106 unchanged (80% of the section changed)

3 unchanged sentences

This discussion and analysis should be read in

conjunction with the consolidated financial statements and notes thereto included in this Annual Report on Form 10-K.

Historical results

and percentage relationships set forth in the statement of operations, including trends which might appear, are not necessarily indicative

of future operations.

Biopharmaceuticals, Inc.

is a clinical-stage biotechnology company developing immunotherapy medicines based on a family of small

molecules called halogenated xanthenes (“HXs”).

The Company’s lead HX molecule is rose bengal sodium (“RBS”).

Series D and D-1 Convertible Preferred Stock

June 20, 2021, the outstanding non-amended 2017 Notes converted into 12,373,247 shares of Series D Convertible Preferred Stock at the

Original Conversion Price of $0.2862, and all the outstanding Amended 2017 Notes and outstanding 2020 Notes converted into 9,440,594

shares of Series D-1 Convertible Preferred Stock at the New Conversion Price of $2.862.

a result of the conversion of the 2017 Notes and 2020 Notes into convertible preferred stock, all the security interests of these notes

in the Company’s intellectual property were released.

August 13, 2021, the Board approved a Financing Term Sheet (the “2021 Term Sheet”), which sets forth the terms under which

the Company will use its best efforts to arrange for financing of a maximum of $5,000,000 (the “2021 Financing”), which amounts

will be obtained in several tranches.

of December 31, 2021, the Company had received 2021 Notes proceeds of $1,460,000, as defined below, of which $200,000 is from a related

party investor.

to the 2021 Term Sheet, the 2021 Notes (defined below) will be paid back, convert into shares of the Company’s Series D-1 Preferred

Stock, or convert into Company equity securities and/or debt instruments of certain future financings on or before twelve months after

the issue date of a 2021 Note, subject to certain exceptions.

2021 Financing will be in the form of unsecured convertible loans from the investors and evidenced by convertible promissory notes (individually,

a “2021 Note” and collectively, the “2021 Notes”).

In addition to customary provisions, the 2021 Notes will contain

the following provisions:

2021 Notes will bear interest at the rate of eight percent (8%) per annum on the outstanding principal amount of the Loan

that has been funded to the Company;

the event there is a change of control of the Board, the term of the 2021 Notes will be accelerated and all amounts due under the

2021 Notes may be immediately due and payable at the investors’ option;

outstanding principal amount and interest payment under the 2021 Notes may be paid back at maturity at the investors’ option;

outstanding principal amount and interest payable under the 2021 Notes may be convertible at the investors’ option into shares

of Series D-1 Convertible Preferred Stock at a price per share equal to $2.8620.

The Series D-1 Convertible Preferred Stock is convertible

into ten (10) shares of common stock;

the event the Company conducts a qualified equity or debt financing and the Company receives gross proceeds in the aggregate amount

of $20 million, the 2021 Notes may be converted into the equity securities and/or debt instruments of such financing at the

same terms as those investors.

an as-converted basis, the Series D-1 Preferred Stock carries the right to ten (10) votes per share.

The Series D-1 Preferred

Stock does not have any dividend preference but will be entitled to receive, on a pari passu basis, dividends, if any,

that are declared and paid on any other class of the Company’s capital stock.

The holders of Series D-1 Preferred Stock do

not have anti-dilution protection.

2021, holders of 18,052,966 warrants to purchase the common stock of the Company at $0.053 per share, have exercised these warrants.

The Company has received proceeds in the aggregate amount of $962,223.

On August 30, 2021, a total of 68,723,698 of August 2016 warrants

conjunction with the accompanying consolidated financial statements and notes thereto included in the Annual Report on Form 10-K.

results and percentage relationships set forth in the statements of operations, including trends which might appear, are not necessarily

indicative of future operations.

Company is selectively continuing ongoing and planning to initiate new monotherapy and combination therapy ITU PV-10 clinical trials

in melanoma and liver cancer indications to generate more and/or new clinical data and appropriately utilizing clinical data from historical

ITU PV-10 trials, EAPs, and/or QOL study of these oncology indications.

Our goals are to pursue drug approval pathways and/or co-development

relationships with commercial pharmaceutical companies for ITU PV-10 based on these indications and data.

Company is developing a systemically-administered formulation of pharmaceutical-grade RBS for the treatment of cancer.

Our goals, when

this work is complete, are to file an investigational new drug application (“IND”) with the FDA, take an initial systemic

drug product candidate into an early-stage clinical trial for an initial oncology or hematology indication, and/or pursue a co-development

collaboration or out-license arrangement for this route of administration and disease area.

Company is developing different formulations of pharmaceutical-grade RBS using different concentrations and different routes of administration

(e.g., PO, IV, IN) for other disease areas by endeavoring to show preclinical activity and lack of toxicity.

Our goals, when each task

of this work is completed, are to file an IND with the FDA, take an initial drug product candidate into an early-stage clinical trial for

an initial indication, and/or pursue a co-development collaboration or out-license arrangement for the respective disease area and route

of administration.

Company is endeavoring to fully elucidate the traits and characteristics of the RBS molecule using different academic medical centers

under sponsored research and testing agreements.

Our goal is to gain and communicate additional knowledge of the RBS molecule’s

targeting, mechanism, signaling, immune response, and other features that are common to and/or different from each disease area and indication

under research.

Company is doing rigorous, chemical analytical comparisons of non-pharmaceutical grades of rose bengal from specialty chemical suppliers

against the Company’s pharmaceutical-grade RBS.

Our goal is to demonstrate the proprietary nature of the Company’s pharmaceutical-grade

RBS and that our pharmaceutical-grade RBS meets the necessary uniformity and purity requirements for commercial pharmaceutical use.

Drug Substance and Drug Product Candidate Manufacturing

pharmaceutical-grade RBS resulted from the Company’s innovation of a proprietary, patented, commercial-scale process to synthesize

and utilize the RBS molecule into a viable API for commercial pharmaceutical use;

the development of unique chemistry, manufacturing,

and control (“CMC”) specifications for drug substance and drug product candidate manufacturing processes;

the production

and multi-year stability testing of multiple drug substance and drug product candidate lots;

the comprehensive documentation of lot composition

and reproducibility;

and the review and acceptance of CMC data from these lots by seven different national drug regulatory agencies for

use in a prior, multi-country, multi-center Phase 3 randomized control trial of the Company.

Company’s drug substance and drug product candidate manufacturing processes employ Quality-by-Design principles, current good manufacturing

practice (“cGMP”) regulations, and the guidelines of The International Council for Harmonization (ICH) of Technical Requirements

for Pharmaceuticals for Human Use.

These processes utilize controls that eliminate the formation of historical impurities and avoid the

introduction of potentially hazardous impurities that the Company believes may have been and could be present in uncontrolled and unreported

amounts in non-pharmaceutical-grades of rose bengal.

Company’s processes of synthesizing the RBS molecule into pharmaceutical-grade RBS and manufacturing RBS drug substance and ITU

PV-10 drug product candidate, the processes’ CMC specifications, and the CMC data from the production of stability lots of drug

substance and drug product candidate have been reviewed by multiple national drug regulatory agencies prior to granting clinical trial

authorizations for the Company to commence a historical Phase 3 study of ITU PV-10 for the treatment of locally advanced cutaneous melanoma,

including the U.S.

FDA, Germany’s Bundesinstitut für Arzneimittel und Medizinprodukte (BfArM), Australia’s Therapeutic

Goods Administration (TGA) under a clinical trial notification, France’s Agence Nationale de Sécurité du Médicament

et des Produits de Santé (ANSM), Italy’s Agenzia Italiana del Farmaco (AIFA), Mexico’s Comisión Federal para

la Protección contra Riesgos Sanitarios (COFEPRIS), and Argentina’s Administración Nacional de Medicamentos, Alimentos

y Tecnología Médica (ANMAT).

Nonproprietary Name

RBS name for the Company’s pharmaceutical-grade API was selected by and passed the review of the WHO Expert Advisory Panel on the

International Pharmacopoeia and Pharmaceutical Preparations after the Company applied for the non-proprietary name in the third quarter

of 2020, and reached the status of recommended INN.

INN Recommended List 88, which includes the RBS name, was published with the No.

3 issue of the WHO Drug Information, Volume 36 in the fourth quarter of 2022.

aim of the INN system since inception has been to provide health professionals with a unique and universally available designated name

to identify each pharmaceutical substance or API, according to the WHO.

The existence of an international nomenclature, in the form of

INN, is important for the accurate identification, prescribing, and dispensing of medicines to patients, and for communication and exchange

of information among health professionals and scientists worldwide.

Medical Diagnostic Use of Rose Bengal

Liver Diagnostic Use

1971, 131 I rose bengal (Robengatope ® [rose bengal sodium 131 I injection USP]) was approved by the

FDA (NDA 016224) for use as a diagnostic aid to determine liver function.

In 2009, manufacturer Bracco Diagnostics Inc.

withdrew Robengatope

from the U.S.

market because of the emergence of newer liver imaging methods, such as computed tomography.

Ophthalmic Diagnostic Use

1974, Barnes-Hind Pharmaceuticals, Inc.

(“Barnes-Hind”) introduced a medical device product of 1% rose bengal in an aqueous

solution for the diagnosis of corneal injury, diagnosis of keratitis, keratoconjunctivitis, and sicca, and detection of foreign bodies

In 1981, Barnes-Hind introduced ophthalmic strips of the same concentration for the same indications.

While both the solution

and strip medical device products were accepted by the FDA for marketing, the Company does not believe that the devices or their respective

claims were approved by the FDA because their introductions predated formal FDA review and approval of medical devices.

Non-Pharmaceutical

Grades of Rose Bengal

Commercial-Grade

material may be purchased from specialty chemical suppliers in the U.S.

and from other parts of the world;

however, the Company believes

that the material itself is almost exclusively made in China and India under non-cGMP conditions.

Commercial-grade rose bengal appears

to have reported purity that may vary between approximately 80% and 95%, and that may contain substantial amounts of unreported impurities

and/or gross contaminants.

Commercial-grade rose bengal is typically used by researchers for preclinical study of the rose bengal molecule

for potential biomedical therapeutic applications.

believe that commercial-grade rose bengal is still manufactured using the historical process (or a variant thereof) that was developed

by the synthetic molecule’s Swiss creator Rudolph Gnehm in 1881.

Some manufacturers may, however, apply purification techniques

that the Company believes still result in material that may possess questionable purity and contaminants and may also be subject to substantial

lot-to-lot manufacturing variability.

Diagnostic-Grade

Company coined this phrase to describe non-approved rose bengal that is used as an ingredient in historical or current ophthalmic solutions

and strips, has been historically or is presently compounded by pharmacists for ophthalmic use, and has been or is in other non-ophthalmic

diagnostic tests such as the rose bengal test in human brucellosis.

presume, but have not yet confirmed, that diagnostic-grade rose bengal is derived from commercial-grade rose bengal that may have undergone

a form of purification and/or may have been compounded under cGMP regulations by a pharmacist, academic medical researcher, or commercial

Here too, the Company believes that purification may not sufficiently improve the amounts and accuracy of rose bengal purity

and lot contents and may not adequately reduce or eliminate lot-to-lot manufacturing variability.

Analytical Comparison

the first quarter of 2022, the Company began work with a U.S.

contract development and manufacturing organization to rigorously and methodically

assess three lots of commercial-grade rose bengal, one each from three different specialty chemical suppliers, and compare and contrast

these non-pharmaceutical grade materials with the Company’s pharmaceutical-grade RBS.

This chemical analytical work was substantially

completed by the end of the third quarter of 2022.

The Company believes that the preliminary results of these analyses indicate that

all three lots of commercial-grade rose bengal had rose bengal purity that was drastically different from what was represented on their

respective certificates of analysis (“CofAs”), and that one of the three lots contained gross contaminants that were not

represented on its CofA.

Barriers to Entry

Company believes that the Company’s proprietary, patented, pharmaceutical-grade RBS possesses several competitive advantages over

non-pharmaceutical-grades of rose bengal that researchers, clinicians, and academic, business, and/or governmental competitors have used,

are using, and/or may attempt to use for potential biomedical applications.

The Company believes that non-pharmaceutical-grades of rose

bengal may suffer from the uncontrolled presence of substance-related impurities and/or gross contaminants, substantial lot-to-lot manufacturing

variability, inaccurately reported and/or misrepresented purity and contents, and the lack of reproducible, consistent, and fulsome CMC

specifications and documentation.

Company believes that historical and potentially hazardous impurities and other manufacturing and handling issues facing non-pharmaceutical-grades

of rose bengal may pose significant scientific, technological, and economic challenges to overcome and validate for compliance with modern

drug regulatory standards.

of Operating Results

revenue is recognized when qualifying costs are incurred and there is reasonable assurance that the conditions of the grant have been met.

Cash received from grants in advance of incurring qualifying costs is recorded as unearned grant revenue and recognized as grant revenue

when qualifying costs are incurred.

and Development Expenses

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of the Years Ended December 31, 2022 and 2021

operating expenses were $4,672,254 for the year ended December 31, 2021, a decrease of $291,322 or 5.9% compared to the year ended December

The decrease was driven by our continued transformation and process improvement efforts within the Company, along with lower

amortization expense and reduced professional service fees.

Net loss for the year ended December 31, 2021 was $5,539,543, a decrease

of $1,138,044 or 17.0% compared to the year ended December 31, 2020, which resulted from reduced costs incurred in connection with our

preclinical and clinical trial programs, general and administrative costs, and interest expense due to the conversion of the 2017 and

2020 Notes, plus the gain associated with the extinguishment of the Company’s PPP loan.

Grant revenue was $989,042 for the year ended December 31, 2022,

compared to $0 for the year ended December 31, 2021.

The increase was driven by grant revenue recognized related to qualifying

expenses that were incurred and included within research and development on the consolidated statements of operations.

operating expenses were $4,416,988 for the year ended December 31, 2022, a decrease of $255,266 or 5.5% compared to the year ended

December 31, 2021.

The decrease was driven by our continued transformation and process improvement efforts within the Company, along

with lower clinical trial and research expenses, reduced legal fees and lower rent expense.

Net loss for the year ended December 31,

2022 was $3,554,683, a decrease of $1,984,860 or 35.8% compared to the year ended December 31, 2021, which resulted from reduced

costs incurred in connection with our preclinical and clinical trial programs, general and administrative costs, and interest

expense due to the conversion of the 2017 and 2020 Notes.

For the Years Ended

Increase/(Decrease)

Grant Revenue

Operating Expenses:

5 unchanged sentences

Research and development tax credit

Investment and interest income

Gain from forgiveness of PPP loan and interest

Interest expense

Interest expense, net

Total Other Expense, Net

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$ (5,539,543 )

$ (1,138,044 )

the years ended December 31, 2022 and 2021, there was $989,042 and $0, respectively, of grant revenue recognized related to qualifying

expenses that were incurred and included within research and development on the consolidated statements of operations.

and Development

and development expenses were $2,608,357 for the year ended December 31, 2021, a decrease of $204,403 or 7.3% compared to the year ended

December 31, 2020.

The decrease was due to (i) lower amortization due to patents being fully amortized, and (ii) lower insurance cost,

partially offset by (iii) increased clinical trial costs as sites resumed enrollment and treatments.

and development expenses were $2,389,360 for the year ended December 31, 2022, a decrease of $218,997 or 8.4% compared to $2,608,357

for the year ended December 31, 2021.

The decrease was due to lower clinical trial cost and lower rent expense, partially offset by increased

insurance costs.

following table summarizes our research and development expenses incurred during the years ended December 31, 2022 and 2021:

1 unchanged sentence

Increase/(Decrease)

Operating Expenses:

Research and development:

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and Administrative

and administrative expenses were $2,063,897 for the year ended December 31, 2021, a decrease of $86,919 or 4.0% compared to the year

ended December 31, 2020.

The decrease was due to (i) lower insurance cost, (ii) lower professional fees, and (iii) lower other general

and administrative cost, partially offset by (iv) higher legal fees from conversion of 2017 and 2020 Notes and addition of 2021 Notes,

and (v) higher payroll and related taxes due to an additional employee.

and administrative expenses were $2,027,628 for the year ended December 31, 2022, a decrease of $36,269 or 1.8% compared to $2,063,897

for the year ended December 31, 2021.

The decrease was due to (i) lower legal fees, (ii) lower rent expense, and (iii) lower other general

and administrative cost, partially offset by (iv) higher insurance cost, (v) higher professional fees, and (vi) higher payroll and related

taxes due to an additional employee.

following table summarizes our general and administrative expenses incurred during the years ended December 31, 2022 and 2021:

1 unchanged sentence

Increase/(Decrease)

Operating Expenses:

General and administrative:

Directors fees

Legal and litigation

Other general and administrative cost

5 unchanged sentences

Income/(Expense)

income increased by $60,304 from $34,109 for the year ended December 31, 2020 to $94,413 for the year ended December 31, 2021, mainly

due to the forgiveness of the PPP Loan.

and development tax credits were $36,954 for the year ended December 31, 2022, an increase of $5,639, compared to $31,315 for the year

ended December 31, 2021.

from extinguishment decreased from $63,094 for the year ended December 31, 2021 to $0 for the year ended December 31, 2022 due to the

forgiveness of the PPP Loan and interest in 2021.

expense decreased by $798,007 from $961,698 for the year ended December 31, 2021 to $163,691 for the year ended December 31, 2022.

The decrease was due to the conversion of the 2017 and 2020 Notes into shares of Series D and Series D-1 Convertible Preferred Stock.

decrease was due to the conversion of the 2017 and 2020 Notes into shares of Series D and Series D-1 Preferred Stock.

following table summarizes our Other Income/(Expenses) incurred during the years ended December 31, 2022 and 2021:

For the Years

Increase/(Decrease)

For the Years Ended

Other Income/(Expense):

Research and development tax credit

Investment and interest income

Gain from forgiveness of PPP Loan and interest

Interest expense

Gain from extinguishment

Interest income and interest expense

Total Other Expenses, Net

$ (1,714,011 )

and Going Concern

cash, cash equivalents, and restricted cash were $3,106,942 at December 31, 2021, which includes the $2,423,958

of restricted cash associated with the grant received from the State of Tennessee, compared with $97,231 at December 31, 2020.

The consolidated

financial statements and notes thereto included in this Annual Report on Form 10-K have been prepared on a basis that contemplates the

realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

We have continuing net losses

and negative cash flows from operating activities.

In addition, we have an accumulated deficit of $246,033,958 as of December 31, 2021.

These conditions raise substantial doubt about our ability to continue as a going concern for a period of at least one year from the

date that the consolidated financial statements included elsewhere in this Annual Report on Form 10-K are issued.

Our financial

statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we

be unable to continue as a going concern.

Our ability to continue as a going concern depends on our ability to obtain additional financing

as may be required to fund current operations.

cash, and restricted cash were $1,431,707 at December 31, 2022, which includes the $1,410,102 of restricted cash associated with the

grant received from the State of Tennessee.

The consolidated financial statements and notes thereto included in this Annual Report on

Form 10-K have been prepared on a basis that contemplates the realization of assets and the satisfaction of liabilities and commitments

in the normal course of business.

We have continuing net losses and negative cash flows from operating activities.

In addition, we have

an accumulated deficit of $249,588,641 as of December 31, 2022.

These conditions raise substantial doubt about our ability to continue

as a going concern for a period of at least one year from the date that the consolidated financial statements included elsewhere in this

Annual Report on Form 10-K are issued.

Our financial statements do not include any adjustments to the amounts and classification of assets

and liabilities that may be necessary should we be unable to continue as a going concern.

Our ability to continue as a going concern

depends on our ability to obtain additional financing as may be required to fund current operations.

plans include selling our equity securities and obtaining other financing to fund our capital requirement and on-going operations, including

3 unchanged sentences

be needed to continue and complete our ongoing and planned clinical trials.

As of December 31, 2021 and 2020, we had cash and cash equivalents of $3,106,942,

including $2,423,958 of restricted cash, and $97,231, respectively, and a working capital deficit of $4,258,679 and $30,288,035, respectively.

Cash requirements for our current liabilities include approximately, $3,352,184 for accounts payable and accrued expenses (including lease

requirements for our current liabilities include approximately $4,614,528 for accounts payable and accrued expenses (including lease

liabilities) and a $239,394 note payable related to our short-term financing of our commercial insurance policies.

1 unchanged sentence

prior to maturity, convertible debt in the amount of $1,827,500 plus accrued interest will mature one year from the date of the notes.

There are no cash requirements for long term liabilities at December 31, 2021.

The Company intends to meet these cash requirements from

its current cash balance and from future financing.

Cash requirements for long-term liabilities include $73,376 for operating lease liabilities.

The Company intends to meet these cash requirements

from its current cash balance and from future financing.

plans to access capital resources through possible public or private equity offerings, including the 2022 Financing, exchange offers,

16 unchanged sentences

Cash Used in Operating Activities

experienced negative cash flow from operating activities for the years ended December 31, 2021 and 2020 in the amounts of $1,013,304-

experienced negative cash flows from operating activities for the years ended December 31, 2022 and 2021 in the amounts of $3,041,472

and $1,013,304, respectively.

The net cash used in operating activities for the year ended December 31, 2021 was primarily due to

cash used to fund a net loss of $5,539,543, adjusted for non-cash expenses in the aggregate amount of $54,717, plus $4,471,522

of cash generated from changes in the levels of operating assets and liabilities.

The net cash used in operating activities for the

year ended December 31, 2020 was primarily due to cash used to fund a net loss of $6,677,587, adjusted for non-cash expenses in the aggregate

amount of $450,123, plus $2,141,669 of cash generated from changes in the levels of operating assets and liabilities.

The net cash used in operating activities for the year ended December 31, 2022 was primarily due to cash

used to fund a net loss of $3,554,683, adjusted for non-cash items in the aggregate amount of $66,803, plus $446,408 of cash generated

from changes in the levels of operating assets and liabilities.

The net cash used in operating activities for the year ended December

31, 2021 was primarily due to cash used to fund a net loss of $5,539,543, adjusted for non-cash expenses in the aggregate amount of $54,717,

plus $4,471,522 of cash generated from changes in the levels of operating assets and liabilities.

Cash Provided by Financing Activities

cash provided by financing activities during the years ended December 31, 2022 and 2021 was $1,367,841 and $4,024,046, respectively.

During the year ended December 31, 2021, $3,160,000 were proceeds from the issuance of convertible notes payable, $962,223 were from

the exercise of warrants and, $150,000 was from the investment to purchase Series D-1 Preferred Stock, less $248,177 for

repayment of short-term note payable.

During the year ended December 31, 2020, $3,225,000 were proceeds from the issuance of convertible

notes payable, $418,676 were from the exercise of warrants, less $105,985 for repayment of short-term note payable, and $62,500 was proceeds

received through the PPP loan.

Accounting Estimates

The preparation of

financial statements and related disclosures must be in conformity with U.S.

These accounting principles require us to make estimates

and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the

reported amounts of revenue and expense during the periods presented.

We believe that the estimates and judgments upon which it relies

are reasonably based upon information available to us at the time that it makes these estimates and judgments.

To the extent that there

are material differences between these estimates and actual results, our financial results will be affected.

The accounting policies

that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding and

evaluating our reported financial results are described below.

The following is

not intended to be a comprehensive list of all of our accounting policies or estimates.

Our accounting policies are more fully described

in Note 3 – Summary of Significant Accounting Policies, in our financial statements included at the end of this Annual Report.

Stock-Based Compensation

We measure the cost of services received in

exchange for an award of equity instruments based on the fair value of the award on the date of grant.

The fair value amount of the shares

expected to ultimately vest is then recognized over the period for which services are required to be provided in exchange for the award,

usually the vesting period.

The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual

results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period that

the estimates are revised.

During the year ended December 31, 2022, we received $1,627,500 proceeds from the issuance of convertible notes payable and $259,659

for the repayment of short-term note payable.

During the year ended December 31, 2021, we received $3,160,000 proceeds from the issuance

of convertible notes payable, $962,223 from the exercise of warrants and $150,000 from the investment to purchase Series D-1 Preferred

Stock, less $248,177 for repayment of short-term note payable.

Accounting Estimates and Policies

preparation of financial statements and related disclosures must be in conformity with U.S.

These accounting principles require

us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements

as well as the reported amounts of revenue and expense during the periods presented.

We believe that the estimates and judgments upon

which it relies are reasonably based upon information available to us at the time that it makes these estimates and judgments.

extent that there are material differences between these estimates and actual results, our financial results will be affected.

A critical accounting estimate to our financial statements include stock-based

compensation, research and development expenses, grant, and valuation of income taxes.

The accounting

policies that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding

and evaluating our reported financial results are described below.

following is not intended to be a comprehensive list of all of our accounting policies or estimates.

Our accounting policies are more

fully described in Note 3 – Summary of Significant Accounting Policies, in our financial statements included at the end of this

Annual Report.

measure the cost of services received in exchange for an award of equity instruments based on the fair value of the award on the date

The fair value amount of the shares expected to ultimately vest is then recognized over the period for which services are required

to be provided in exchange for the award, usually the vesting period.

The estimation of stock-based awards that will ultimately vest

requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as

a cumulative adjustment in the period that the estimates are revised.

We account for forfeitures as they occur.

Research and Development

Research and development expenses consist

of expenses incurred in performing research and development activities, including compensation and benefits for research and development

employees and consultants, facilities expenses, overhead expenses, cost of laboratory supplies, manufacturing expenses, fees paid to

third parties and other outside expenses.

We accrue for costs incurred as the services are being provided by monitoring the status of

the clinical trial or project and the invoices received from our external service providers.

We adjust our accrual as actual costs become

and Development

and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits

for research and development employees and consultants, facilities expenses, overhead expenses, cost of laboratory supplies, manufacturing

expenses, fees paid to third parties and other outside expenses.

We accrue for costs incurred as the services are being provided by

monitoring the status of the clinical trial or project and the invoices received from our external service providers.

We adjust our accrual

as actual costs become known.

Company accounts for income taxes under the liability method in accordance with Accounting Standards Codification (“ASC”)

740 “Income Taxes”.

Under this method, deferred income tax assets and liabilities are determined based on differences between

financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect

when the differences are expected to reverse.

A valuation allowance is established if it is more likely than not that all, or some portion,

of deferred income tax assets will not be realized.

The Company has recorded a full valuation allowance to reduce its net deferred income

tax assets to zero.

In the event the Company were to determine that it would be able to realize some or all its deferred income tax assets

in the future, an adjustment to the deferred income tax asset would increase income in the period such determination was made.

Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained upon an examination.

Any recognized income tax positions would be measured at the largest amount that is greater than 50% likely of being realized.

in recognition or measurement would be reflected in the period in which the change in judgment occurs.

The Company would recognize any

corresponding interest and penalties associated with its income tax positions in income tax expense.

Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative

financial instruments to be separately accounted for in accordance with ASC Topic 815:

Derivatives and Hedging .

The accounting

treatment of derivative financial instruments requires that the Company record qualifying embedded conversion options and any related

freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance

Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance

The Company reassesses the classification of its derivative instruments at each balance sheet date.

If the classification

changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

Embedded conversion options classified as derivative liabilities and any related equity classified freestanding instruments are recorded

as a discount to the host instrument.

the instrument is determined to not be a derivative liability, the Company then evaluates for the existence of a beneficial conversion

feature by comparing the commitment date fair value to the effective conversion price of the instrument.

Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement

of its preferred stock.

Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at

Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within

the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control)

are classified as temporary equity.

At all other times, preferred shares are classified as stockholders’ deficiency.

Grant Revenue

Grant revenue is recognized when qualifying costs

are incurred and there is reasonable assurance that the conditions of the grant have been met.

Cash received from grants in advance of incurring

qualifying costs is recorded as unearned grant revenue and recognized as grant revenue when qualifying costs are incurred.

The Company expenses all costs as incurred in connection

with patent applications (including direct application fees, and the legal and consulting expenses related to making such applications)

and such costs are included in general and administrative expenses in the accompanying statements of operations and comprehensive loss.

Accounting Pronouncements

3 unchanged sentences

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