3 unchanged sentences
Our business, financial condition or results of operations could be materially and adversely affected by these risks if any of them actually occur.
−Removed: Our common stock is quoted on the OTCQB under the symbol “EMBI.” This market is extremely limited and the prices quoted are not a reliable indication of the value of our common stock.
+Added: Our common stock is quoted on the OTCQB under the symbol “SKYE.” This market is extremely limited, and the prices quoted are not a reliable indication of the value of our common stock.
As of the date of this Annual Report, there has been very limited trading of shares of our common stock.
4 unchanged sentences
Risks Related to our Business and Capital Requirements
−Removed: Since we have a limited operating history in our business, it is difficult for potential investors to evaluate our business.
−Removed: Our short operating history may hinder our ability to successfully meet our objectives and makes it difficult for potential investors to evaluate our business or prospective operations.
−Removed: We have not generated any revenues since inception and we are not currently profitable and may never become profitable.
−Removed: As an early-stage company, we are subject to all the risks inherent in the financing, expenditures, operations, complications and delays inherent in a new business.
−Removed: Accordingly, our business and success face risks from uncertainties faced by developing companies in a competitive environment.
−Removed: There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.
We currently have no product revenues and no products approved for marketing and need substantial additional funding to continue our operations.
−Removed: We may not be able to raise capital when needed, if at all, which would force us to delay, reduce or eliminate our product development programs or commercialization efforts and could cause our business to fail.
We expect to need substantial additional funding to pursue the clinical development of our product candidates and launch and commercialize any product candidates for which we receive regulatory approval.
−Removed: Our existing cash position is under $1.0 million and we need to bring in additional capital in the near term.
−Removed: We require additional capital for the development and commercialization of our product candidates.
−Removed: Furthermore, we expect to incur additional costs associated with operating as a public company.
−Removed: We may also encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may increase our capital needs and/or cause us to spend our cash resources faster than we expect.
−Removed: Accordingly, we will need to obtain substantial additional funding in order to continue our operations.
+Added: We need to bring in additional capital in the near term and expect to incur additional costs associated with operating as a public company.
+Added: We may also encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may increase our capital needs.
As noted in our audited financial statements for the years ended December 31, 2020 and 2019, the uncertainties surrounding our ability to fund our operations raise substantial doubt about our ability to continue as a going concern.
−Removed: To date, we have financed our operations entirely through investments by founders and other investors.
+Added: To date, we have financed our operations entirely through debt and equity financings.
We may seek additional funds through public or private equity or debt financing, via strategic transactions or collaborative arrangements.
Additional funding from those or other sources may not be available when or in the amounts needed, on acceptable terms, or at all.
−Removed: If we raise capital through the sale of equity, or securities convertible into equity, it would result in dilution to our then existing stockholders, which could be significant depending on the price at which we may be able to sell our securities.
−Removed: If we raise additional capital through the incurrence of indebtedness, we would likely become subject to covenants restricting our business activities, and holders of debt instruments may have rights and privileges senior to those of our equity investors.
−Removed: In addition, servicing the interest and principal repayment obligations under debt facilities could divert funds that would otherwise be available to support research and development, clinical or commercialization activities.
−Removed: If we obtain capital through collaborative arrangements, these arrangements could require us to relinquish rights to our technology or product candidates and could result in our receipt of only a portion of the revenues associated with the partnered product.
There are no assurances that future funding will be available on favorable terms or at all.
−Removed: If additional funding is not obtained, we may need to reduce, defer or cancel preclinical and lab work, planned clinical trials, or overhead expenditures to the extent necessary.
−Removed: The failure to fund our operating and capital requirements could have a material adverse effect on our business, financial condition and results of operations.
+Added: If additional funding is not obtained, we may need to reduce, defer or cancel preclinical and lab work, planned clinical trials, or overhead expenditures, which could have a material adverse effect on our business, financial condition and results of operations.
If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.
2 unchanged sentences
Our historical financial statements have been prepared under the assumption that we will continue as a going concern.
−Removed: Our independent registered public accounting firm has issued a report on our audited financial statements for the year ended December 31, 2019 that included an explanatory paragraph referring to our recurring operating losses and expressing substantial doubt in our ability to continue as a going concern.
+Added: Our independent registered public accounting firm has issued a report on our audited financial statements for the years ended December 31, 2020 and 2019 that included an explanatory paragraph referring to our recurring operating losses and expressing substantial doubt in our ability to continue as a going concern.
Our ability to continue as a going concern is dependent upon our ability to obtain additional equity financing or other capital, attain further operating efficiencies, reduce expenditures, and, ultimately, generate revenue.
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If UM were to terminate one or more of our agreements, we may be required to return or destroy certain materials or data developed during our partnership that is confidential to UM and face substantial delays or possible termination of the affected program.
−Removed: In addition, the agreements provide that all intellectual property rights (including any patents and non-manufacturing related know-how) that are conceived by both UM and us during the course of the collaboration are to be jointly owned by UM and us.
−Removed: Because UM exercises some control over this jointly owned intellectual property, we may need to seek UM’s consent to pursue, use, license and/or enforce some of these intellectual property rights in the future.
+Added: In addition, the agreements provide that all intellectual property rights (including any patents and non-manufacturing related know-how) that are conceived by both UM and us during the course of the collaboration are to be jointly owned by UM and us, and we may need to seek UM’s consent to pursue, use, license and/or enforce some of these intellectual property rights in the future.
An unexpected deterioration in our relationship with UM may have a material adverse effect on our business, reputation, results of operations and financial condition.
We are heavily dependent on the success of our early-stage product candidates, which will require significant additional efforts to develop and may prove not to be viable for commercialization.
−Removed: We are very early in our development efforts.
We have no products approved for sale and all of our product candidates are in preclinical development, including the development of cannabinoid-based formulations.
Further preclinical testing is ongoing and if successful, will be part of a regulatory filing to satisfy Investigational New Drug (“IND”) requirements that need to be met in order for the candidate compounds and routes of administration to enter testing in humans.
−Removed: Our ability to generate product revenue, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and commercialization of our product candidates.
Our business depends entirely on the successful development, clinical testing, and commercialization of these and any other product candidates we may seek to develop in the future, which may never occur.
−Removed: The success of our product candidates will depend on several factors, any one of which we may not be able to successfully complete, such as:
+Added: The success of our product candidates will depend on several factors, which we may not be able to successfully complete, such as:
receipt of necessary controlled substance registrations from the DEA;
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receipt of marketing approvals from the FDA and other applicable regulatory authorities;
−Removed: obtaining, maintaining and protecting our intellectual property portfolio, including patents and trade secrets, and regulatory exclusivity for our product candidates;
+Added: obtaining, maintaining and protecting our intellectual property portfolio;
identifying, making arrangements and ensuring necessary registrations with third party manufacturers, or establishing commercial manufacturing capabilities for applicable product candidates;
−Removed: launching commercial sales of the products, if and when approved, whether alone or in collaboration with others;
+Added: launching commercial sales of the products, if and when approved;
acceptance of our products, if and when approved, by patients, the medical community and third party payors;
−Removed: effectively competing with other therapies;
obtaining and maintaining healthcare coverage and adequate reimbursement of our products; and
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We expect to conduct clinical trials for certain of our product candidates at sites outside the United States, and the FDA may not accept data from trials conducted in such locations.
−Removed: We expect to conduct one or more of our clinical trials outside the United States.
−Removed: Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of this data is subject to certain conditions imposed by the FDA.
−Removed: For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with ethical principles.
−Removed: The trial population must also adequately represent the U.S.
−Removed: population, and the data must be applicable to the U.S.
−Removed: population and U.S.
−Removed: medical practice in ways that the FDA deems clinically meaningful.
−Removed: Generally, the patient population for any clinical trials conducted outside of the United States must be representative of the population for whom we intend to seek approval in the United States.
−Removed: In addition, while these clinical trials are subject to the applicable local laws, FDA acceptance of the data will be dependent upon its determination that the trials also complied with all applicable U.S.
−Removed: laws and regulations.
−Removed: There can be no assurance that the FDA will accept data from trials conducted outside of the United States.
−Removed: If the FDA does not accept the data from any of our clinical trials that we conduct outside the United States, it would likely result in the need for additional trials, which would be costly and time-consuming and delay or permanently halt our development of the product candidate.
−Removed: In addition, the conduct of clinical trials outside the United States could have a significant impact on us.
−Removed: Risks inherent in conducting international clinical trials include:
−Removed: foreign regulatory requirements that could restrict or limit our ability to conduct our clinical trials;
−Removed: administrative burdens of conducting clinical trials under multiple foreign regulatory schema;
−Removed: foreign exchange fluctuations;
−Removed: diminished protection of intellectual property in some countries.
We conduct certain research and development operations through our Australian wholly owned subsidiary.
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If our subsidiary loses its ability to operate in Australia, or if we are ineligible or unable to receive the R&D tax credit, or the Australian government significantly reduces or eliminates the tax incentive program, our business and results of operation may be adversely affected.
−Removed: We may not be successful in our efforts to build a pipeline of product candidates.
−Removed: Our strategy is to use and expand our relationship with UM to build a pipeline of cannabinoid-based products.
−Removed: We may not be able to develop product candidates that are safe and effective for all or any of our targets.
−Removed: Even if we are successful in building a product pipeline, the potential product candidates that we identify may not be suitable for clinical development for a number of reasons, including due to harmful side effects or other characteristics that indicate a low likelihood of receiving marketing approval or achieving market acceptance.
−Removed: If our methods of identifying potential product candidates fail to produce a pipeline of potentially viable product candidates, then we may not be able to obtain product revenue in future periods, which would make it unlikely that we would ever achieve profitability.
We expect to face intense competition, often from companies with greater resources and experience than we have.
−Removed: The pharmaceutical industry is highly competitive and subject to rapid change.
−Removed: The industry continues to expand and evolve as an increasing number of competitors and potential competitors enter the market.
−Removed: Many of these competitors and potential competitors have substantially greater financial, technological, managerial and research and development resources and experience than we have.
−Removed: Some of these competitors and potential competitors have more experience than we have in the development of pharmaceutical products, including validation procedures and regulatory matters.
−Removed: In addition, our pipeline products, if successfully developed, will compete with product offerings from large and well-established companies that have greater marketing and sales experience and capabilities than we or our collaboration partners have.
+Added: The highly competitive pharmaceutical industry continues to rapidly expand and evolve as an increasing number of competitors and potential competitors enter the market, many of which have substantially greater financial, technological, managerial and research and development resources and experience than we have.
+Added: Our pipeline products, if successfully developed, will compete with product offerings from large and well-established companies that have greater marketing and sales experience and capabilities than we or our collaboration partners have.
If we are unable to compete successfully, we may be unable to grow and sustain our revenue.
−Removed: We have substantial capital requirements that, if not met, may hinder our operations.
−Removed: We anticipate that we will make substantial capital expenditures for laboratory and preclinical work and for future clinical trials.
−Removed: If we cannot raise sufficient capital, we may have limited ability to expend the capital necessary to undertake or complete laboratory and preclinical work and future clinical trials.
−Removed: There can be no assurance that debt or equity financing will be available or sufficient to meet these requirements or for other corporate purposes, or if debt or equity financing is available, that it will be on terms acceptable to us.
−Removed: Moreover, future activities may require us to alter our capitalization significantly.
−Removed: Our inability to access sufficient capital for our operations could have a material adverse effect on our financial condition, results of operations or prospects.
−Removed: Additional capital may be costly or difficult to obtain.
−Removed: Additional capital, whether through the offering of equity or debt securities, may not be available on reasonable terms or at all, especially in light of the recent downturn in the economy and dislocations in the credit and capital markets.
−Removed: If we are unable to obtain required additional capital, we may have to curtail our growth plans or cut back on existing business and, further, we may not be able to continue operating if we do not generate sufficient revenues from operations needed to stay in business.
−Removed: We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs.
−Removed: We may also be required to recognize non- cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition.
−Removed: Current global financial conditions have been characterized by increased volatility which could negatively impact our business, prospects, liquidity and financial condition.
+Added: The current volatility of global financial conditions could negatively impact our business and financial condition.
Current global financial conditions and recent market events have been characterized by increased volatility and the resulting tightening of the credit and capital markets has reduced the amount of available liquidity and overall economic activity.
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Our ability to compete in the highly competitive biotechnology and pharmaceuticals industries depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel.
−Removed: Our success depends in large measure on our key personnel, including Dr.
−Removed: Brian Murphy, our Chief Executive Officer.
−Removed: The loss of the services of Dr.
−Removed: Murphy could significantly hinder our operations.
−Removed: We do not currently have key person insurance in effect for Dr.
+Added: Our success depends in large measure on our key personnel, including Mr.
+Added: Punit Dhillon, our Chief Executive Officer.
+Added: The loss of the services of Mr.
+Added: Dhillon could significantly hinder our operations.
+Added: We do not currently have key person insurance in effect for Mr.
In addition, the competition for qualified personnel in the pharmaceutical industry is intense and there can be no assurance that we will be able to continue to attract and retain all personnel necessary for the development and operation of our business.
−Removed: We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property or claiming ownership of what we regard as our own intellectual property.
−Removed: Some of our employees were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors.
−Removed: Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, with contractual provisions and other procedures, we may be subject to claims that these employees or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employers.
−Removed: Litigation may be necessary to defend against any such claims.
−Removed: In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact contributes to the development of intellectual property that we regard as our own.
−Removed: Further, the terms of such assignment agreements may be breached and we may not be able to successfully enforce their terms, which may force us to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of intellectual property rights we may regard and treat as our own.
−Removed: We will need to grow the size of our organization, and we may experience difficulties in managing any growth we may achieve.
−Removed: As of the date of this Annual Report, we have four full-time employees.
−Removed: As our development and commercialization plans and strategies develop, we expect to need additional research, development, managerial, operational, sales, marketing, financial, accounting, legal and other resources.
−Removed: Future growth would impose significant added responsibilities on members of management.
−Removed: Our management may not be able to accommodate those added responsibilities, and our failure to do so could prevent us from effectively managing future growth, if any, and successfully growing our company.
−Removed: If we breach any of the agreements under which we license from UM the commercialization rights to our product candidates, we could lose license rights that are important to our business and our operations could be materially harmed.
−Removed: We license from UM the use, development and commercialization rights for our product candidates.
−Removed: As a result, our current business plans are dependent upon our maintenance of the license agreements and the rights we license under it.
−Removed: If we fail to comply with any of the conditions or obligations or otherwise breach the terms of our license agreement with UM, or any future license agreement we may enter on which our business or product candidates are dependent, UM may have the right to terminate the applicable agreement in whole or in part and thereby extinguish our rights to the licensed technology and intellectual property and/or any rights we have acquired to develop and commercialize certain product candidates.
−Removed: The loss of the rights licensed to us under our license agreement with UM, or any future license agreement that we may enter granting rights on which our business or product candidates are dependent, would eliminate our ability to further develop the applicable product candidates and would materially harm our business, prospects, financial condition and results of operations.
−Removed: Our operating activities may be restricted as a result of covenants related to the outstanding indebtedness under our Credit Agreement and we may be required to repay the outstanding indebtedness in an event of default, which could have a material adverse effect on our business.
−Removed: We could default on the payment of our indebtedness under our Multi-Draw Credit Agreement entered into with Emerald Health Sciences, a related party, on October 5, 2018 (the “Credit Agreement”), when it comes due which may result in acceleration of all amounts outstanding under our Credit Agreement.
+Added: Breach of any of the license agreements with UM could result in the loss of such license rights that are important to our business and our operations could be materially harmed.
+Added: We licensed from UM the use, development and commercialization rights for our product candidates.
+Added: As a result, our current business plans are dependent upon our maintenance of the license agreements and the rights we licensed under it.
+Added: If we breach the terms of our license agreement with UM, or any future license agreement on which our business or product candidates are dependent, UM or other licensors may have the right to terminate the applicable agreement in whole or in part and thereby limit or terminate our rights to the licensed technology and intellectual property and/or any rights we have acquired to develop and commercialize certain product candidates.
+Added: The loss of the rights licensed to us under our license agreement with UM, or any future license agreement that we may enter granting rights on which our business or product candidates are dependent, would harm, or even eliminate, our ability to further develop the applicable product candidates and would materially harm our business, prospects, financial condition and results of operations.
+Added: Our operating activities may be restricted as a result of covenants related to the outstanding indebtedness under our Credit Agreement.
+Added: We could default on the payment of our indebtedness under our Amended and Restated Multi-Draw Credit Agreement entered into with Emerald Health Sciences, Inc.
+Added: (“Emerald Health Sciences”), a related party, on April 1, 2020 (the “Credit Agreement”), when it comes due which may result in acceleration of all amounts outstanding under our Credit Agreement.
Additionally, our Credit Agreement restricts, among other things, our ability to incur debt and requires us to comply with certain covenants.
−Removed: We may not be able to comply with these restrictions and covenants in the future.
−Removed: Our failure to comply with any of the restrictions and covenants under our Credit Agreement could result in an event of default under our Credit Agreement and result in the acceleration of the maturity of the indebtedness under the Credit Agreement.
+Added: We may not be able to comply with these restrictions and covenants in the future, which could result in an event of default under our Credit Agreement and result in the acceleration of the maturity of the indebtedness under the Credit Agreement.
We may not have enough available cash or be able to raise additional funds through equity or debt financings to repay such indebtedness at the time any such event of default occurs.
−Removed: In that case, we may be required to delay, limit, reduce or terminate our product candidate development or commercialization efforts or grant to others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
−Removed: As our products and company are in a highly regulated industry, significant and unforeseen changes in policy may have material impacts on our business.
−Removed: A primary reason for our company to develop the cannabis-derived pharmaceuticals is the changing regulatory and social landscape, in terms of cannabis.
−Removed: State efforts to decriminalize and/or legalize, as well as the growth of state level medical marijuana rulings, have created the opportunity to develop the medical potential for cannabis.
−Removed: However, cannabis is still illegal on a Federal level, outside of the areas described above.
−Removed: We do not know what impact might occur to our development plans, if the Federal law were to change dramatically in the near-term.
−Removed: While we believe the licensed intellectual property, the institutional knowledge, and our management experience will provide us with what is necessary to achieve our goals, we cannot predict the impact of any changes in the current regulatory environment
−Removed: The use of “medical marijuana” or “recreational marijuana” in the United States may impact our business.
−Removed: There is a substantial amount of change occurring in various states of the United States regarding the use of “medical marijuana.” While cannabis is a Schedule I substance as defined under federal law, and its possession and use is not permitted in accordance with federal law, a number of individual states have enacted state laws to authorize possession and use of cannabis for medical purposes, and in some states for recreational purposes.
−Removed: While our product candidates are distinct from crude herbal cannabis, our prospects may nevertheless be impacted by these laws at the state level in the United States.
−Removed: As with all medicines, it is very difficult to gauge accurately market acceptance of our potential drug candidates.
−Removed: While we are taking and will take significant efforts in selecting drug candidates that we believe represent the best opportunities for market adoption, such as unsatisfied needs, competitive environment, partnering potential, therapeutic potential, and target product profile potential, the ultimate market acceptance of a preclinical candidate is very difficult to predict.
−Removed: The ultimate acceptance will be impacted by the performance in clinical trials (efficacy and safety), reimbursement and development of competitive compounds.
−Removed: Also, the healthcare reimbursement environment has been changing over the recent past and is likely to continue to evolve.
−Removed: If we are unable to gain market acceptance for our product candidates, if approved, then we may not be able to generate substantial product revenues.
−Removed: We currently have no marketing and sales experience or capabilities to market and sell our product candidates, if approved.
−Removed: We currently do not have experience in the marketing, sales and distribution of any of our product candidates that are able to attain regulatory approval.
−Removed: If our product candidates receive regulatory approval, we will need to establish sales and marketing capabilities to commercialize our product candidates, which will be expensive and time consuming.
−Removed: Any failure or delay in the development of our internal sales and marketing capabilities would adversely impact the commercialization of any of our products that we obtain approval to market.
−Removed: If we are not successful in commercializing our product candidates, either on our own or through collaborations with one or more third parties, our future product revenue will suffer and we may incur significant additional losses.
−Removed: Our commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among physicians and patients.
−Removed: Even if approved by the FDA, our product candidates may not gain market acceptance among physicians and patients, which is vital to our commercial success.
−Removed: Market acceptance of any product candidate for which we receive approval depends on a number of factors, including:
−Removed: the clinical indications for which the drug is approved and efficacy and safety as demonstrated in clinical trials;
−Removed: the timing of market introduction of the product candidate and/or competitive products;
−Removed: acceptance of the drug as a safe and effective treatment by physicians and patients;
−Removed: the potential and perceived advantages of the product candidate over alternative treatments;
−Removed: the cost of treatment in relation to alternative treatments; and
−Removed: the prevalence and severity of adverse side effects.
−Removed: If our product candidates are approved but fail to achieve an adequate level of acceptance by physicians and patients, we will not be able to generate significant revenues, and we may not become or remain profitable.
−Removed: We may expend our limited resources to pursue a particular product candidate or indication and may fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
−Removed: Because we have limited financial and managerial resources, we must focus our efforts on particular research programs and product candidates for specific indications.
−Removed: As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential.
−Removed: Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.
−Removed: If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
−Removed: Any such failure to improperly assess potential product candidates could result in missed opportunities and/or our focus on product candidates with low market potential, which would harm our business and financial condition.
−Removed: We engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect on us.
+Added: In that case, we may be required to delay, limit, reduce or terminate our product candidate development or commercialization efforts or grant others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
+Added: We engage in transactions with related parties which present possible conflicts of interest that could have an adverse effect on us.
We have entered, and may continue to enter, into transactions with Emerald Health Sciences and its affiliates and other related parties for financing, corporate, business development and operational services.
3 unchanged sentences
This could have a material effect on our business, results of operations and financial condition.
−Removed: The details of certain of these transactions are set forth in “Certain Relationships and Related Party Transactions.” Related party transactions create the possibility of conflicts of interest with regard to our management, including that:
−Removed: we may enter into contracts between us, on the one hand, and related parties, on the other, that are not the result of arm’s-length transactions;
+Added: The details of certain of these transactions are set forth in “Certain Relationships and Related Party Transactions.” Related party transactions create the possibility of conflicts of interest with regard to our management, we may enter into contracts between us, on the one hand, and related parties, on the other, that may not result in arm’s-length transactions, including that:
our executive officers and directors that hold positions of responsibility with related parties may be aware of certain business opportunities that are appropriate for presentation to us as well as to such other related parties and may present such business opportunities to such other parties; and
4 unchanged sentences
Notwithstanding this, it is possible that a conflict of interest could have a material adverse effect on our liquidity, results of operations and financial condition.
−Removed: We are expecting delays to our NB1111 clinical trial as a result of the COVID-19 and unpredictable business disruptions could seriously harm our future revenues and financial condition, increase our costs and expenses and impact our ability to raise capital.
−Removed: Our operations could be subject to unpredictable events, such as earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics such as the COVID-19 outbreak and other natural or manmade disasters or business interruptions, for which we are predominantly self-insured.
−Removed: We do not carry insurance for all categories of risk that our business may encounter.
+Added: We are expecting delays to our THCVHS clinical trial because of the COVID-19 pandemic and unpredictable business disruptions could seriously harm our future revenues and financial condition, increase our costs and expenses, and impact our ability to raise capital.
+Added: Our operations could be subject to unpredictable events, such as earthquakes, power shortages, telecommunications failures, water shortages, medical epidemics such as the COVID-19 outbreak and other natural or manmade disasters or business interruptions, for which we are predominantly self-insured.
The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.
Notably, we rely on third party manufacturers to produce our product candidates.
−Removed: The manufacturing of the active pharmaceutical ingredient of NB1111 is conducted in the United States.
−Removed: Formulation of the eye drop for testing is also performed in the United States but can rely on regulatory-accepted excipients that can be sourced from countries outside the United States, such as China.
−Removed: In lieu of the recent pandemic of COVID-19, there could possibly be an impact on sourcing materials that are part of the eye drop formulation, as well as impacting volunteer and/or patient recruitment in Australia for clinical studies.
−Removed: Therefore, we anticipate shifting our first-in-human studies of the lead drug candidate, NB1111, from the second half of 2020, to the 2021 timeframe.
+Added: In connection with the recent COVID-19 pandemic, there could possibly be an impact on sourcing materials that are part of the eye drop formulation, as well as impacting volunteer and/or patient recruitment in Australia for clinical studies.
+Added: Therefore, we have shifted our first-in-human studies of the lead drug candidate, THCVHS, from the second half of 2020 to the third quarter of 2021.
Additionally, COVID-19 has caused significant disruptions to the global financial markets which could impact our ability to raise additional capital.
−Removed: The ultimate impact on us and our significant suppliers and manufacturers is unknown, but our operations and financial condition could suffer in the event of these type of unpredictable events.
−Removed: Further, any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our business, results of operations, financial condition and cash flows from future prospects.
+Added: The ultimate impact on us and our significant suppliers and manufacturers is unknown, but our operations and financial condition could suffer, and any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our business, results of operations, financial condition and cash flows from future prospects.
Risks Related to Controlled Substances
The product candidates we are developing will be subject to U.S.
−Removed: controlled substance laws and regulations and failure to comply with these laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the results of our business operations, both during non-clinical and clinical development and post-approval, and our financial condition.
+Added: controlled substance laws and regulations, and failure to comply with or the cost of compliance with these laws and regulations, may adversely affect the results of our business operations, and our financial condition.
The product candidates we plan to develop will contain controlled substances as defined in the CSA.
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Schedule I substances by definition have a high potential for abuse, no currently “accepted medical use” in the United States, lack accepted safety for use under medical supervision, and may not be prescribed, marketed or sold in the United States.
−Removed: Pharmaceutical products approved for use in the United States may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest potential for abuse or dependence and Schedule V substances the lowest relative risk among such substances.
+Added: Pharmaceutical products approved for use in the United States may be listed as Schedule II, III, IV or V.
Schedule I and II drugs are subject to the strictest controls under the CSA, including manufacturing and procurement quotas, security requirements and criteria for importation.
In addition, dispensing of Schedule II drugs is further restricted.
−Removed: For example, they may not be refilled without a new prescription.
While cannabis, cannabis extracts, and some cannabinoids are Schedule I controlled substances, products approved for medical use in the United States that contain cannabis, cannabis extracts or some cannabinoids must be placed on Schedules II-V, since approval by the FDA satisfies the “accepted medical use” requirement.
−Removed: If approved by the FDA, we expect the finish dosage forms of our cannabinoid-derived drug product candidates to be listed by the DEA as a Schedule II or III controlled substance.
+Added: If approved by the FDA, we expect the finished dosage forms of our cannabinoid-derived drug product candidates to be listed by the DEA as a Schedule II or III controlled substance.
Consequently, their manufacture, importation, exportation, domestic distribution, storage, sale and legitimate use will be subject to a significant degree of regulation by the DEA.
In addition, the scheduling process may take one or more years, thereby delaying the launch of the drug product in the United States.
−Removed: Furthermore, if the FDA, DEA, or any foreign regulatory authority determines that any of our drug product candidates may have potential for abuse, it may require us to generate more clinical or other data than we currently anticipate to establish whether or to what extent the substance has an abuse potential, which could increase the cost and/or delay the launch of the drug product.
+Added: Furthermore, if the FDA, DEA, or any foreign regulatory authority determines that any of our drug product candidates may have potential for abuse, it may require us to generate more clinical or other data than we currently anticipate establishing whether or to what extent the substance has an abuse potential, which could increase the cost and/or delay the launch of the drug product.
Facilities conducting research, manufacturing, distributing, importing or exporting, or dispensing controlled substances must be registered (licensed) to perform these activities and have the security, control, recordkeeping, reporting and inventory mechanisms required by the DEA to prevent drug loss and diversion.
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Individual states have also established controlled substance laws and regulations.
−Removed: Though state- controlled substances laws often mirror federal law, because the states are separate jurisdictions, they may separately schedule our product candidates.
While some states automatically schedule a drug based on federal action, other states schedule drugs through rulemaking or a legislative action.
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In the United States, the DEA regulates activities relating to the cultivation, possession and supply of cannabis for medical research and/or commercial development, including the requirement to obtain annual registrations to manufacture or distribute pharmaceutical products derived from cannabis extracts.
−Removed: The NIDA also plays a role in oversight of the cultivation of cannabis for medicinal research.
+Added: The National Institute on Drug Abuse (“NIDA”) also plays a role in oversight of the cultivation of cannabis for medicinal research.
We do not currently handle any controlled substances, but we plan to partner with third parties to engage in the research and development of cannabis-derived compounds for medical purposes.
−Removed: This will require that our third-party contractors obtain and maintain the necessary DEA registrations, and be subject to other regulatory requirements.
−Removed: We plan to develop and manufacture synthetically produced active drug products and in February 2016, July 2018 and April 2019, signed agreements with AMRI to synthetically manufacture our API to be used in our development programs for glaucoma and CINV.
−Removed: In August 2019, we terminated our ongoing agreements with AMRI.
−Removed: We entered into an agreement with Noramco in February 2019 to develop scale-up synthesis methods and to manufacture the analog derivative, CBDVHS, and amended the agreement in August 2019 to include THCVHS.
The cultivation of cannabis is strictly regulated in the United States under a complex legal framework and our partners may be unable to obtain or maintain the necessary authorizations to cultivate cannabis for the research and development of cannabis-derived compounds.
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The regulation of cannabis is complex and subject to stringent controls.
−Removed: UM has indicated that its plan for cultivating cannabis for the purification of cannabis extracts is in compliance with applicable law, including the CSA, DEA regulations, and the United States’ obligations under the 1961 Single Convention on Narcotic Drugs.
−Removed: However, there is a risk that regulatory authorities may disagree or may decline to authorize UM to engage in the contemplated activities under the partnership.
−Removed: Interpretations of law that DEA adopted in the past may evolve or change.
If UM cannot obtain or maintain the necessary regulatory authorizations that we anticipate will be required for the contemplated development program, our business may suffer, and we may not be able to pursue the discovery, research and development of cannabinoids.
+Added: While UM conducts research using cannabinoids derived from the plant, all of the Company’s candidate molecules are synthetic derivatives and therefore may not fall under the DEA’s definition of a controlled substance.
Risks Related to Government Regulation
−Removed: If we fail to demonstrate the safety and efficacy of any product candidate that we develop to the satisfaction of the FDA or comparable foreign regulatory authorities we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of such product candidate.
−Removed: This would adversely impact our ability to generate revenue, our business and our results of operations.
+Added: If we fail to demonstrate the safety and efficacy of any product candidate that we develop to the satisfaction of the regulatory authorities, we may incur additional costs or experience difficulty in completing, the development and commercialization of such product candidate.
We are not permitted to commercialize, market, promote, or sell any product candidate in the United States without obtaining marketing approval from the FDA or in other countries without obtaining approvals from comparable foreign regulatory authorities, such as the European Medicines Agency (the “EMA”), and we may never receive such approvals.
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We have not previously submitted a new drug application (“NDA”) to the FDA, or similar drug approval filings to comparable foreign authorities, for any product candidate, and we cannot be certain that any of our product candidates will be successful in clinical trials or receive regulatory approval.
−Removed: Further, our product candidates may not receive regulatory approval even if they are successful in clinical trials.
If we do not receive regulatory approval for our product candidates, we may not be able to continue our operations.
Even if we successfully obtain regulatory approval to market our product candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval and have commercial rights.
−Removed: The FDA or any foreign regulatory bodies could delay, limit or deny approval of our product candidates for many reasons, including:
−Removed: our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory body that the product candidate is safe and effective for the requested indication;
−Removed: the FDA’s or the applicable foreign regulatory agency’s disagreement with the interpretation of data from preclinical studies or clinical trials;
−Removed: our inability to demonstrate that the clinical and other benefits of the product candidate outweigh any safety or other perceived risks;the FDA’s or the applicable foreign regulatory agency’s requirement for additional preclinical or clinical studies;
−Removed: the FDA’s or the applicable foreign regulatory agency’s non-approval of the formulation, labeling or the specifications of the product candidate;
−Removed: the FDA’s or the applicable foreign regulatory agency’s failure to approve the manufacturing processes or facilities of third-party manufacturers with which we contract; or
−Removed: the potential for approval policies or regulations of the FDA or the applicable foreign regulatory agencies to significantly change in a manner rendering our clinical data insufficient for approval.
−Removed: Even if we eventually complete clinical testing and receive approval of a NDA or foreign regulatory filing for a product candidate, the FDA or the applicable foreign regulatory agency may grant approval contingent on the performance of costly additional clinical trials which may be required after approval.
+Added: The FDA or any foreign regulatory bodies could delay, limit or deny approval of our product candidates for many reasons, including our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory body that the product candidate is safe and effective for the requested indication, the regulatory agency’s disagreement with the interpretation of data from preclinical studies or clinical trials, or our inability to demonstrate that the clinical and other benefits of the product candidate outweigh any safety or other perceived risks.
+Added: The FDA or applicable regulatory body could also require additional preclinical or clinical studies, deny approval of the formulation, labeling or the specifications of the product candidate, or the manufacturing processes or facilities of third party manufacturers with which we contract.
+Added: The policies of the applicable regulatory agencies could also significantly change in a manner rendering our clinical data insufficient for approval.
+Added: Even if we eventually complete clinical testing and receive approval of a NDA or foreign regulatory filing for a product candidate, the FDA or the applicable foreign regulatory agency may grant approval contingent on the performance of costly additional clinical trials.
The FDA or the applicable foreign regulatory agency also may approve the product candidate for a more limited indication or a narrower patient population than we originally requested, and the FDA, or applicable foreign regulatory agency, may not approve the labeling that we believe is necessary or desirable for the successful commercialization of the product.
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A failure of one or more clinical trials can occur at any stage of testing.
−Removed: The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results.
−Removed: Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.
We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or subsequently to commercialize our product candidates, including:
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we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;
−Removed: clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;
−Removed: the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;
−Removed: our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
−Removed: we may have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks;
regulators or IRBs may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;
the cost of clinical trials of our product candidates may be greater than we anticipate;
−Removed: the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and
our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs to suspend or terminate the trials.
−Removed: If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:
−Removed: be delayed in obtaining marketing approval for our product candidates;
−Removed: not obtain marketing approval at all;
−Removed: obtain approval for indications or patient populations that are not as broad as intended or desired;
−Removed: obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;
−Removed: be subject to additional post-marketing testing requirements; or
−Removed: have the product removed from the market after obtaining marketing approval.
−Removed: Our product development costs will also increase if we experience delays in testing or in receiving marketing approvals.
−Removed: We do not know whether any of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all.
−Removed: Significant preclinical study or clinical trial delays also could allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.
If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.
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In addition, some of our competitors have ongoing clinical trials for product candidates that treat the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates.
−Removed: Patient enrollment is affected by other factors including:
−Removed: the severity of the disease under investigation;
−Removed: the eligibility criteria for the study in question;
−Removed: the perceived risks and benefits of the product candidate under study;
−Removed: the efforts to facilitate timely enrollment in clinical trials;
−Removed: the patient referral practices of physicians;
−Removed: the ability to monitor patients adequately during and after treatment; and
−Removed: the proximity and availability of clinical trial sites for prospective patients.
−Removed: Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether.
−Removed: Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.
−Removed: Our development and commercialization strategy for THCVHS, including NB1111, may depend, in part, on published scientific literature and the FDA’s prior findings regarding the safety and efficacy of dronabinol, based on data not developed by us, but upon which the FDA may rely in reviewing our NDA.
+Added: Patient enrollment is affected by other factors including the severity of the disease under investigation, the eligibility criteria for the study in question, the perceived risks and benefits of the product candidate, the patient referral practices of physicians, the ability to monitor patients adequately during and after treatment, and the proximity and availability of clinical trial sites for prospective patients.
+Added: Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether, which could result in increased development costs and cause the value of our company to decline and limit our ability to obtain additional financing.
+Added: Our development and commercialization strategy for THCVHS, may depend, in part, on published scientific literature and the FDA’s prior findings regarding the safety and efficacy of dronabinol, based on data not developed by us, but upon which the FDA may rely in reviewing our NDA.
The Hatch-Waxman Act added Section 505(b)(2) to the Federal Food, Drug and Cosmetic Act (“FDCA”), Section 505(b)(2) permits the filing of a NDA where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted.
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The label, however, may require all or some of the limitations, contraindications, warnings or precautions included in the listed product’s label, including a black box warning, or may require additional limitations, contraindications, warnings or precautions.
−Removed: Depending on guidance from the FDA, we may decide to submit a NDA for NB1111 under Section 505(b) relying, in part, on the FDA’s previous findings of safety and efficacy from investigations for the approved drug product Dronabinol for which we have not received a right of reference and published scientific literature.
+Added: Depending on guidance from the FDA, we may decide to submit a NDA for THCVHS under Section 505(b)(2) relying, in part, on the FDA’s previous findings of safety and efficacy from investigations for the approved drug product Dronabinol for which we have not received a right of reference and published scientific literature.
Even though we may be able to take advantage of Section 505(b)(2) to support potential U.S.
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If the FDA changes its interpretation of Section 505(b)(2), or if the FDA’s interpretation is successfully challenged in court, this could delay or even prevent the FDA from approving any Section 505(b)(2) NDAs that we submit.
−Removed: Such a result could require us to conduct additional testing and costly clinical trials, which could substantially delay or prevent the approval and launch of our product candidates, including NB1111.
+Added: Such a result could require us to conduct additional testing and costly clinical trials, which could substantially delay or prevent the approval and launch of our product candidates, including THCVHS.
Even if we receive regulatory approval for a product candidate, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and subject us to restrictions, withdrawal from the market, or penalties if we fail to comply with applicable regulatory requirements or if we experience unanticipated problems with our product candidates, when and if approved.
Once regulatory approval has been granted, the approved product and its manufacturer are subject to continual review by the FDA, DEA and/or non-U.S.
−Removed: regulatory authorities.
−Removed: Any regulatory approval that we receive for our product candidates may be subject to limitations on the indicated uses for which the product may be marketed or contain requirements for potentially costly post-marketing follow-up studies or surveillance to monitor the safety and efficacy of the product.
−Removed: In addition, if the FDA and/or non-U.S.
−Removed: regulatory authorities approve any of our product candidates, we will be subject to extensive and ongoing regulatory requirements by the FDA and other regulatory authorities with regard to labeling, packaging, adverse event reporting, storage, distribution, advertising, promotion, recordkeeping and submission of safety and other post-market information.
−Removed: Manufacturers of our products and manufacturers’ facilities are required to comply with current good manufacturing practice (“cGMP”) regulations, which include requirements related to quality control and quality assurance as well as the corresponding maintenance of records and documentation.
−Removed: Further, regulatory authorities must approve these manufacturing facilities before they can be used to manufacture our products, and these facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations.
−Removed: Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.
+Added: regulatory authorities and such approval may be subject to limitations on the indicated uses for which the product may be marketed or contain requirements for potentially costly post-marketing follow-up studies or surveillance.
+Added: In addition, we will be subject to extensive and ongoing regulatory requirements with regard to labeling, packaging, adverse event reporting, storage, distribution, advertising, promotion, recordkeeping and submission of safety and other post-market information.
+Added: Manufacturers of our products and manufacturers’ facilities are required to comply with current good manufacturing practice (“cGMP”) regulations, which include requirements related to quality control and quality assurance as well as the corresponding maintenance of records and documentation Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.
We will also be required to report certain adverse reactions and production problems, if any, to the FDA and to comply with requirements concerning advertising and promotion for our products.
If we, any future collaboration partner or a regulatory authority discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory authority may impose restrictions on that product, the collaboration partner, the manufacturer or us, including requiring withdrawal of the product from the market or suspension of manufacturing.
−Removed: Any DEA registrations that we receive may also be subject to limitations.
−Removed: For example, if approved, our commercial products will be subject to the DEA’s annual manufacturing and procurement quota requirements.
+Added: Any DEA registrations that we receive may also be subject to limitations such as the DEA’s annual manufacturing and procurement quota requirements.
The annual quota allocated to us or our contract manufacturers for the controlled substances in our product candidates may not be sufficient to meet commercial demand.
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The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling and regulatory requirements.
−Removed: The FDA also imposes stringent restrictions on manufacturers’ communications regarding off-label use and if we do not restrict the marketing of our products only to their approved indications, we may be subject to enforcement action for off-label marketing.
If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with regulatory requirements of the FDA and/or other non-U.S.
−Removed: regulatory authorities, we could be subject to administrative or judicially imposed sanctions, including:
−Removed: warning letters or untitled letters;
−Removed: mandated modifications to promotional materials or the required provision of corrective information to healthcare practitioners;
−Removed: restrictions imposed on the product or its manufacturers or manufacturing processes;
−Removed: restrictions imposed on the labeling or marketing of the product;
−Removed: restrictions imposed on product distribution or use;
−Removed: requirements for post-marketing clinical trials;
−Removed: suspension of any ongoing clinical trials;
−Removed: suspension of or withdrawal of regulatory approval;
−Removed: voluntary or mandatory product recalls and publicity requirements;
−Removed: refusal to approve pending applications for marketing approval of new products or supplements to approved applications filed by us;
−Removed: restrictions on operations, including costly new manufacturing requirements;
−Removed: seizure or detention of our products;
−Removed: refusal to permit the import or export of our products;
−Removed: required entry into a consent decree, which can include imposition of various fines (including restitution or disgorgement of profits or revenue), reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance;
−Removed: civil or criminal penalties; or
+Added: regulatory authorities, we could be subject to administrative or judicially imposed sanctions.
Widely publicized events concerning the safety risk of certain drug products have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and the imposition by the FDA of risk evaluation and mitigation strategies (“REMS”), to ensure that the benefits of the drug outweigh its risks.
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In addition, because of the serious public health risks of high-profile adverse safety events with certain products, the FDA may require, as a condition of approval, costly REMS programs.
−Removed: The regulatory requirements and policies may change, and additional government regulations may be enacted for which we may also be required to comply.
−Removed: For example, in December 2016, the 21st Century Cures Act (the “Cures Act”) was signed into law.
−Removed: The Cures Act, among other things, is intended to modernize the regulation of drugs and spur innovation, but its ultimate implementation is unclear.
−Removed: If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or in other countries.
−Removed: For example, certain regulatory policies of the Trump administration may impact our business and industry in ways that are difficult or impossible to predict.
−Removed: Since the November 2016 U.S.
−Removed: presidential election, the Trump administration has made numerous efforts to reduce regulation and its associated costs, including the issuance of a number of Executive Orders which could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications.
−Removed: In January 2017, President Trump issued Executive Order 13771, applicable to all executive agencies, including the FDA, which requires an agency to repeal two existing rules for each new significant rule or guidance document to be issued, unless otherwise prohibited by law.
−Removed: This “two-for-one” policy is aimed at reducing regulatory costs.
−Removed: For fiscal years 2018 and beyond, this Executive Order requires agencies to identify regulations to offset any incremental cost of a new regulation and approximate the total costs or savings associated with each new regulation or repealed regulation.
−Removed: It is difficult to predict the extent to which such regulatory reform initiatives and actions will impact the FDA’s ability to exercise its regulatory authority.
−Removed: If these executive actions impose constraints on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.
If we or any future collaboration partner are not able to maintain regulatory compliance, we or such collaboration partner, as applicable, will not be permitted to market our future products and our business will suffer.
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If such an event occurs during development, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development of, or deny approval of, our product candidates.
−Removed: If such an event occurs after such product candidates are approved, a number of potentially significant negative consequences may result, including:
−Removed: regulatory authorities may withdraw the approval of such product;
−Removed: regulatory authorities may require additional warnings on the label or impose distribution or use restrictions;
−Removed: regulatory authorities may require one or more post-market studies;
−Removed: we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;
−Removed: we could be sued and held liable for harm caused to patients; and
−Removed: our reputation may suffer.
+Added: If such an event occurs after such product candidates are approved, a number of potentially significant negative consequences may result, including withdrawal of regulatory approval, requirements for additional warnings on the label, use or distribution restrictions, requirements to conduct post-market studies, requirements to create a medication guide outlining side effects, and liability for harm caused to patients.
Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate, if approved, or could substantially increase commercialization costs and expenses, which could delay or prevent us from generating revenue from the sale of our products and harm our business and results of operations.
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If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates, or if DEA does not register these facilities for the manufacture of controlled substances, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.
−Removed: We do not have commercial supply agreements with our suppliers.
+Added: We do not have any commercial supply agreements with our suppliers.
In the event that we and our suppliers cannot agree to the terms and conditions for them to provide clinical and commercial supply needs, we would not be able to manufacture our product or candidates until a qualified alternative supplier is identified, which could also delay the development of, and impair our ability to commercialize, our product candidates.
The failure of third party manufacturers or suppliers to perform adequately or the termination of our arrangements with any of them may adversely affect our business.
−Removed: We could be subject to costly product liability claims related to our clinical trials and product candidates.
−Removed: Because we plan to conduct clinical trials with human subjects, we face the risk that the use of our product candidates may result in adverse side effects to our patients in our clinical trials.
−Removed: We face even greater risks upon any commercialization of our product candidates.
−Removed: An individual may bring a product liability claim against us alleging that one of our product candidates causes, or is claimed to have caused, an injury or is found to be unsuitable for consumer use.
−Removed: Any product liability claim brought against us, with or without merit, could result in:
−Removed: withdrawal of clinical trial volunteers, investigators, patients or trial sites;
−Removed: the inability to commercialize our product candidates;
−Removed: decreased demand for our product candidates;
−Removed: regulatory investigations that could require costly recalls or product modifications;
−Removed: loss of revenue;
−Removed: substantial costs of litigation;
−Removed: liabilities that substantially exceed our product liability insurance, which we would then be required to pay ourselves;
−Removed: an increase in our product liability insurance rates or the inability to maintain insurance coverage in the future on acceptable terms, if at all;
−Removed: the diversion of management’s attention from our business; and
−Removed: damage to our reputation and the reputation of our products.
−Removed: Product liability claims may subject us to the foregoing and other risks, which could have a material adverse effect on our business, results of operations, financial condition, and prospects.
−Removed: Our employees, independent contractors, principal investigators, CROs, consultants and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
−Removed: We are exposed to the risk that our employees, independent contractors, principal investigators, CROs, consultants and vendors may engage in fraudulent or other illegal activity.
−Removed: Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates:
−Removed: (1) FDA regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA; (2) manufacturing standards; (3) federal and state healthcare fraud and abuse laws and regulations; or (4) laws that require the true, complete and accurate reporting of financial information or data.
−Removed: Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices.
−Removed: These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.
−Removed: Activities subject to these laws also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation.
−Removed: It is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.
−Removed: If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
−Removed: We are subject to uncertainty relating to coverage and reimbursement policies which, if not favorable to our product candidates, could hinder or prevent our products’ commercial success.
−Removed: Our ability to commercialize our product candidates, if approved, successfully will depend in part on the extent to which governmental authorities, private health insurers and other third-party payors establish appropriate coverage and reimbursement levels for our product candidates.
−Removed: As a threshold for coverage and reimbursement, third-party payors generally require that drug products have been approved for marketing by the FDA.
−Removed: A primary trend in the U.S.
−Removed: healthcare industry is cost containment.
−Removed: Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular products and procedures.
−Removed: Increasingly, third-party payors are requiring that companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products.
−Removed: We cannot assure you that coverage and reimbursement will be available for any product that we commercialize and, if coverage is available, what the level of reimbursement will be.
−Removed: Coverage and reimbursement may impact the demand for, or the price of, any product for which we obtain marketing approval.
−Removed: If coverage and reimbursement are not available or are available only to limited levels, we may not be able to successfully commercialize any product candidate that we successfully develop.
Healthcare reform measures could hinder or prevent our products candidates’ commercial success, if approved.
In the United States, there have been, and we anticipate there will continue to be, a number of legislative and regulatory changes to the healthcare system that could impact our ability to sell any of our products profitably if approved.
−Removed: In the United States, the Federal government passed the Patient Protection and Affordable Care Act in 2010, as amended by the Health Care and Education Reconciliation Act (collectively, the “ACA”) which substantially changed the way healthcare is financed by both governmental and private insurers.
−Removed: The ACA contains a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement changes and fraud and abuse, which impact existing government healthcare programs and will result in the development of new programs, including Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program.
−Removed: Additionally, the ACA:
+Added: In the United States, the Federal government passed the Patient Protection and Affordable Care Act in 2010, as amended by the Health Care and Education Reconciliation Act (collectively, the “ACA”).
increases the minimum level of Medicaid rebates payable by manufacturers of brand-name drugs from 15.1% to 23.1%;
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imposes a non-deductible annual fee on pharmaceutical manufacturers or importers who sell “branded prescription drugs” to specified federal government programs.
−Removed: The Trump administration and the U.S.
−Removed: Congress have made numerous efforts to modify, repeal, or otherwise invalidate all, or certain provisions of, the ACA.
−Removed: In May 2017, the U.S.
−Removed: House of Representatives voted to pass the American Health Care Act (the “AHCA”) which would repeal numerous provisions of the ACA.
−Removed: Senate considered, but did not vote to pass, the AHCA, leaving the ACA largely in place.
−Removed: The Tax Cuts and Jobs Act signed into law in December 2017 repealed the ACA’s individual health insurance mandate, which is considered a significant component of the ACA.
−Removed: Uncertainty remains with respect to the impact the Trump administration and the U.S.
−Removed: Congress may have, if any, on the future stability of the ACA and its resulting impact on our business.
−Removed: We expect efforts to modify or repeal the ACA to continue, and the potential impact of such efforts are unclear.
−Removed: Any future changes will likely take time to unfold and could have a significant impact on coverage and reimbursement for healthcare items and services covered by plans that were authorized by the ACA.
−Removed: Increasing emphasis on managed care in the U.S.
−Removed: will continue to put downward pressure on the pricing of products, and cost-control initiatives could have the effect of decreasing the price that we or any of our collaborators may receive for our future products.
−Removed: We expect that the ACA and other healthcare reform initiatives adopted in the future may result in more rigorous coverage criteria and additional downward pressure on the price we may receive for any approved product.
−Removed: We cannot predict with certainty the effect the ACA or other healthcare reform initiatives that may be adopted in the future will have on our business.
−Removed: Our results of operations may be adversely affected by the ACA, changes to the ACA, and by other healthcare reform initiatives adopted in the future.
−Removed: In addition to the ACA, other legislative changes have been proposed and adopted since the ACA was enacted.
−Removed: On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions.
−Removed: The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several government programs.
−Removed: This includes reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013, and, due to subsequent legislative amendments, will remain in effect through 2025 unless Congressional action is taken.
−Removed: On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
−Removed: In addition, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed bills designed to, among other things, reform government program reimbursement methodologies.
−Removed: We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates if approved, or additional pricing pressure.
+Added: We expect that state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates if approved, or additional pricing pressure.
The implementation of cost containment measures or other healthcare reform initiatives may prevent us from being able to generate revenue, attain profitability, or commercialize any products for which we may obtain regulatory approval.
−Removed: The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to make and implement healthcare reforms may adversely affect:
−Removed: our ability to set a price we believe is fair for our products;
−Removed: our ability to generate revenues and achieve or maintain profitability;
−Removed: the availability of capital; and
−Removed: our ability to obtain timely approval of our products.
+Added: The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to make and implement healthcare reforms may adversely affect our ability to set a price we believe is fair for our products, to generate revenues and achieve or maintain profitability, to raise capital, and to obtain timely approval of our products.
We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, and health information privacy and security laws.
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federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third party payors that are false or fraudulent;
−Removed: HIPAA, which created federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;
−Removed: HIPAA, as amended by the Health Information Technology and Clinical Health Act and its implementing regulations, which imposes certain requirements relating to the privacy, security, and transmission of individually identifiable health information;
+Added: HIPAA, which created federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters, and as amended by the Health Information Technology and Clinical Health Act and its implementing regulations, which imposes certain requirements relating to the privacy, security, and transmission of individually identifiable health information;
the federal physician sunshine requirements under the ACA, which require manufacturers of drugs, devices, biologics, and medical supplies to report annually to the U.S.
Department of Health and Human Services information related to payments and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members; and
−Removed: state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
+Added: state law equivalents of each of the above federal laws, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.
In addition, recent health care reform legislation has strengthened these laws.
−Removed: For example, the ACA, among other things, amends the intent requirement of the federal Anti-Kickback and criminal healthcare fraud statutes.
−Removed: A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it.
−Removed: Moreover, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.
If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare and Medicaid, imprisonment, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
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Demand for compassionate use of our unapproved therapies could strain our resources, delay our drug development activities, negatively impact our regulatory approval or commercial activities, and result in losses.
−Removed: We are developing product candidates to treat life-threatening illnesses for which there are currently limited therapeutic options.
+Added: We are developing product candidates to treat conditions for which there are currently limited therapeutic options.
If we experience requests for access to unapproved drugs, we may experience significant disruption to our business which could result in losses.
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In addition, legislation referred to as “Right to Try” laws have been introduced at the local and national levels, which are intended to give patients access to unapproved therapies.
−Removed: New and emerging legislation regarding expanded access to unapproved drugs for life-threatening illnesses could negatively impact our business in the future.
−Removed: Either activism or legislation related to requests for access may require us to initiate an unanticipated expanded access program or to make our product candidates more widely available sooner than anticipated.
Patients who receive access to unapproved drugs through compassionate use or expanded access programs have life-threatening illnesses and generally have exhausted all other available therapies.
−Removed: The risk for serious adverse events, including those which may be unrelated to our product candidates, in this patient population is high and could have a negative impact on the safety profile of our product candidate, which could cause significant delays or an inability to successfully commercialize our product candidate and could materially harm our business.
−Removed: In addition, in order to perform the controlled clinical trials required for regulatory approval and successful commercialization of our product candidates, we may also need to restructure or pause any ongoing compassionate use and/or expanded access programs, which could prompt adverse publicity or other disruptions related to current or potential participants in such programs.
+Added: The risk for serious adverse events in this patient population is high and could have a negative impact on the safety profile of our product candidate, which could cause significant delays or an inability to successfully commercialize our product candidate and could materially harm our business.
+Added: In addition, in order to perform the controlled clinical trials required for regulatory approval and successful commercialization of our product candidates, we may also need to restructure or pause any ongoing compassionate use and/or expanded access programs, which could prompt adverse publicity.
Risks Related to our Common Stock
−Removed: We are subject to the reporting requirements of federal securities laws, which is expensive.
−Removed: We are a public reporting company in the United States and, accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act.
−Removed: The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders causes our expenses to be higher than they would be if we remained a privately-held company.
−Removed: Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls is time consuming, difficult and costly.
−Removed: We are a reporting company with the SEC and therefore must comply with Sarbanes-Oxley Act and SEC rules concerning internal controls.
−Removed: It is time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act.
−Removed: In order to expand our operations, we will need to hire additional financial reporting, internal control, and other finance staff in order to develop and implement appropriate internal controls and reporting procedures.
Our stock price may be volatile, which may result in losses to our stockholders.
The stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies quoted on the OTCQB, where our shares of common stock will be quoted, generally have been very volatile and have experienced sharp share-price and trading-volume changes.
−Removed: The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many of the following factors, some of which are beyond our control:
−Removed: variations in our operating results;
−Removed: changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;
−Removed: changes in operating and stock price performance of other companies in our industry;
−Removed: additions or departures of key personnel; and
−Removed: future sales of our common stock.
+Added: The trading price of our common stock is likely to be volatile and could fluctuate widely in response to factors which may be out of our control, such as variations in our operating results, changes in expectations of our future financial performance, changes in operating and stock price performance of other companies in our industry, additions or departures of key personnel, and future sales of our common stock.
Domestic and international stock markets often experience significant price and volume fluctuations.
These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock.
−Removed: In particular, following initial public offerings, the market prices for stocks of companies often reach levels that bear no established relationship to the operating performance of these companies.
−Removed: These market prices are generally not sustainable and could vary widely.
In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been initiated.
−Removed: Our common shares are thinly-traded, and in the future, may continue to be thinly-traded, and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate such shares.
+Added: Our common shares are thinly-traded, and in the future, may continue to be thinly-traded, and you may be unable to sell at or near ask prices or at all.
We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable.
−Removed: As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.
+Added: As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent.
We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.
−Removed: The market price for our common stock may be particularly volatile given our status as a relatively small company and lack of revenues that could lead to wide fluctuations in our share price.
−Removed: You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.
The market for our common shares may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more volatile than a seasoned issuer for the indefinite future.
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As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction.
−Removed: The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price.
Secondly, an investment in us is a speculative or “risky” investment due to our lack of revenues or profits to date.
As a consequence of this enhanced risk, more risk-averse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.
−Removed: Because we became public by means of a “reverse merger,” we may not be able to attract the attention of major brokerage firms or investors in general.
−Removed: Additional risks may exist because we became a public company through a “reverse merger.” Securities analysts of major brokerage firms may not provide coverage of us since there is little incentive to brokerage firms to recommend the purchase of our common stock.
−Removed: No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf of our company in the future.
−Removed: In addition, the SEC has recently issued an investor bulletin warning to investors about the risks of investing in companies that enter the U.S.
−Removed: capital markets through a “reverse merger.” The release of such information from the SEC may have the effect of reducing investor interest in companies, such as us, that enter the U.S.
−Removed: capital markets through a “reverse merger.”
We cannot assure you that our common stock will become eligible for listing or quotation on any exchange and the failure to do so may adversely affect your ability to dispose of our common stock in a timely fashion.
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The payment of any dividends will be within the discretion of our Board.
−Removed: We presently intend to retain all earnings, if any, to implement our business plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.
−Removed: Our common stock may be subject to penny stock rules, which may make it more difficult for our stockholders to sell their common stock.
+Added: We presently intend to retain all earnings, if any, to implement our business plan;
+Added: accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.
+Added: Our common stock is subject to penny stock rules, which may make it more difficult for our stockholders to sell their common stock.
Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the SEC.
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These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.
−Removed: Volatility in our common stock price may subject us to securities litigation.
−Removed: The market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future.
−Removed: In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities.
−Removed: We may, in the future, be the target of similar litigation.
−Removed: Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.
We will need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to our stockholders.
−Removed: We expect our existing cash will be sufficient to fund our capital requirements for at least the next month.
We require additional capital for the development and commercialization of our product candidates and may require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue.
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We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
−Removed: Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
−Removed: Certain of our executive officers, directors and large stockholders own a significant percentage of our outstanding capital stock.
−Removed: As of March 16, 2020, our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates owned approximately 63% of our outstanding shares of common stock.
−Removed: As of March 16, 2020, Emerald Health Sciences, our majority stockholder, owned approximately 62% of our outstanding shares of common stock.
−Removed: Our Board is controlled by the directors and principal executive officer of Emerald Health Sciences.
−Removed: Accordingly, our directors and executive officers have significant influence over our affairs due to their substantial ownership coupled with their positions on our management team and have substantial voting power to approve matters requiring the approval of our stockholders.
−Removed: For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction.
+Added: Our principal stockholder owns a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
+Added: Our principal stockholder, Emerald Health Sciences, owns a significant percentage of our outstanding capital stock.
+Added: As of February 23, 2021, Emerald Health Sciences owned 31.8% of our outstanding shares of common stock.
+Added: As such, Emerald Health Sciences may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction.
This concentration of ownership may prevent or discourage unsolicited acquisition proposals or offers for our common stock that some of our stockholders may believe is in their best interest.
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We have a total of 5,000,000,000 shares of common stock authorized for issuance and up to 50,000,000 shares of preferred stock with the rights, preferences and privileges that our Board may determine from time to time.
−Removed: As of March 16, 2020, we have reserved 4,512,715 shares for issuance upon the exercise of outstanding options, and 24,830,750 shares for issuance upon the exercise of outstanding warrants.
−Removed: As of March 16, 2020, we had no outstanding preferred stock.
−Removed: As of March 16, 2020, we had 316,792,253 shares of common stock available for issuance.
+Added: As of February 23, 2021, we have reserved;
+Added: 22,050,000 shares for issuance upon the exercise of outstanding options, 18,984,109 shares for issuance under our 2014 equity incentive plan, 5,179,223 shares underlying the Amended Credit Agreement, and 95,580,001 shares for issuance upon the exercise of outstanding warrants.
+Added: As of February 23, 2021, we had no outstanding preferred stock.
+Added: As of February 23, 2021, we had 4,508,198,918 shares of common stock unreserved and available for issuance.
We may seek financing that could result in the issuance of additional shares of our capital stock and/or rights to acquire additional shares of our capital stock.
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The future sales of shares of our common stock issuable upon the exercise of outstanding warrants may have a depressive effect on the market price of our common stock, as such warrants would be more likely to be exercised at a time when the price of our common stock is greater than the exercise price.
−Removed: There is not now, and there may never be, an active, liquid and orderly trading market for our common stock, which may make it difficult for you to sell your shares of our common stock.
−Removed: There is not now, nor has there been since our inception, any significant trading activity in our common stock or a market for shares of our common stock, and an active trading market for our shares may never develop or be sustained.
−Removed: As a result, investors in our common stock must bear the economic risk of holding those shares for an indefinite period of time.
−Removed: Although our common stock is quoted on the OTCQB, an over-the-counter quotation system, trading of our common stock is extremely limited and sporadic and at very low volumes.
−Removed: We do not now, and may not in the future, meet the initial listing standards of any national securities exchange.
−Removed: We presently anticipate that our common stock will continue to be quoted on the OTCQB or another over-the-counter quotation system in the foreseeable future.
−Removed: In those venues, our stockholders may find it difficult to obtain accurate quotations as to the market value of their shares of our common stock and may find few buyers to purchase their stock and few market makers to support its price.
−Removed: As a result of these and other factors, you may be unable to resell your shares of our common stock at or above the price for which you purchased them, or at all.
−Removed: Further, an inactive market may also impair our ability to raise capital by selling additional equity in the future and may impair our ability to enter into strategic partnerships or acquire companies or products by using our shares of common stock as consideration.
−Removed: If we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our reported financial information and the market price of our common stock may be negatively affected.
−Removed: As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control.
−Removed: Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on the internal control over financial reporting.
−Removed: If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our consolidated financial statements may be materially misstated.
−Removed: We may not be able to complete our evaluation, testing and any required remediation in a timely fashion.
−Removed: During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, our management will be unable to conclude that our internal control over financial reporting is effective.
−Removed: Moreover, when we are no longer a smaller reporting company, our independent registered public accounting firm will be required to issue an attestation report on the effectiveness of our internal control over financial reporting.
−Removed: Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect to our internal controls or the level at which our internal controls are documented, designed, implemented or reviewed.
−Removed: If we are unable to conclude that our internal control over financial reporting is effective, or when we are no longer a smaller reporting company, if our auditors were to express an adverse opinion on the effectiveness of our internal control over financial reporting because we had one or more material weaknesses, investors could lose confidence in the accuracy and completeness of our financial disclosures, which could cause the price of our common stock to decline.
−Removed: Internal control deficiencies could also result in a restatement of our financial results in the future.
−Removed: If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
−Removed: The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business.
−Removed: We are currently covered by one research analyst.
−Removed: If no more analysts commence coverage of us, the trading price of our stock would likely decrease.
−Removed: Even if we do obtain more analyst coverage, if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline.
−Removed: If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
The issuance of shares upon exercise of outstanding warrants and options may cause immediate and substantial dilution to our existing stockholders.
If the price per share of our common stock at the time of exercise of any warrants, options, or any other convertible securities is in excess of the various conversion or exercise prices of these convertible securities, conversion or exercise of these convertible securities would have a dilutive effect on our common stock.
−Removed: As of March 16, 2020, we had outstanding (i) warrants to purchase up to 24,830,750 shares of our common stock at exercise prices ranging from $0.00 to $5.00 per share, and (ii) options to purchase up to 4,512,715 shares of our common stock at exercise prices ranging from $0.245 to $0.42 per share.
+Added: As of February 23, 2021, we had outstanding (i) warrants to purchase up to 95,580,001 shares of our common stock at exercise prices ranging from $0.06 to $5.00 per share, and (ii) options to purchase up to 22,050,000 shares of our common stock at exercise prices ranging from $0.045 to $0.31 per share.
Further, any additional financing that we secure may require the granting of rights, preferences or privileges senior to those of our common stock and which result in additional dilution of the existing ownership interests of our common stockholders.
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Similar rules may apply under state tax laws.
−Removed: If it is determined that we have in the past experienced any ownership changes, or if we experience ownership changes as a result of future transactions in our stock, our ability to use our net operating loss carryforwards and other tax attributes to offset U.S.
−Removed: federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.
+Added: During 2018, pursuant to the Emerald Financing transaction, the Company underwent a significant ownership change which likely triggered a limitation under Section 382.
+Added: If we experience ownership changes as a result of future transactions in our stock, our ability to use our net operating loss carryforwards and other tax attributes to offset U.S.
+Added: federal taxable income may be subject to further limitations, which could potentially result in increased future tax liability to us.
Unresolved Staff Comments.
Not applicable.
+Added: Our principal executive and corporate offices are located at 5910 Pacific Center Blvd.
+Added: Suite 320, San Diego, CA 92121.
+Added: Legal Proceedings.
+Added: Not applicable.
+Added: Mine Safety Disclosures.
+Added: Not applicable.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.