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Item 1. Financial Statements

2022-05-12 compared with 2021-11-12 · 245 added, 431 removed, 224 unchanged (75% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current assets:

6 unchanged sentences

Total current liabilities

Other long-term liabilities

Total liabilities

Commitments (Note 11)

Commitments and contingencies (Note 9)

Stockholders' equity:

1 unchanged sentence

Series B, $ 0.001 par value:

1,804,394 shares issued and outstanding as of September 30, 2021 and December 31, 2020

1,804,394 shares issued and outstanding as of March 31, 2022 and December 31, 2021

Series A, $ 0.001 par value:

970,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020

970,000 shares issued and outstanding as of March 31, 2022 and December 31, 2021

Common stock, $ 0.001 par value;

50,000,000 shares authorized as of September 30, 2021 and December 31, 2020;

13,413,013 and 8,772,198 shares issued as of September 30, 2021 and December 31, 2020, respectively;

13,386,022 and 8,745,207 shares outstanding as of September 30, 2021 and December 31, 2020, respectively

50,000,000 shares authorized as of March 31, 2022 and December 31, 2021;

13,468,287 and 13,466,603 shares issued as of March 31, 2022 and December 31, 2021, respectively;

13,441,296 and 13,439,612 shares outstanding as of March 31, 2022 and December 31, 2021, respectively

Additional paid in capital

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED

SEPTEMBER 30,

NINE MONTHS ENDED

SEPTEMBER 30,

Three Months Ended March 31,

Royalty revenue

3 unchanged sentences

( 1,101,399 )

( 1,240,612 )

General and administrative

( 2,766,397 )

( 2,519,515 )

Asset impairment charges

( 9,243,128 )

Total operating costs and expenses

1 unchanged sentence

( 1,560,307 )

( 4,700,829 )

( 13,003,255 )

Loss from operations

1 unchanged sentence

( 1,369,091 )

( 3,872,741 )

( 12,717,645 )

Other income (expense):

Other income (expense)

Interest income, net

Other income:

Interest income

Total other income

Loss before income taxes

$ ( 1,593,611 )

$ ( 1,345,945 )

( 3,803,499 )

( 12,611,959 )

Income tax benefit

$ ( 1,350,876 )

$ ( 7,560,370 )

$ ( 3,803,499 )

$ ( 9,693,441 )

Basic and diluted net loss per share

Basic and diluted loss per share

Weighted-average shares of common stock outstanding, basic and diluted

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'

THREE MONTHS ENDED SEPTEMBER 30, 2021

Value ($0.001)

Paid in Capital

Comprehensive Income

Stockholders' Equity

Balance as of July 1, 2021

$ 194,319,716

$ ( 179,354,709 )

$ ( 5,281,180 )

Issuance of common stock and warrants,

net of issuance costs

Exercise of pre-funded warrants

Exercise of purchase warrants

Issuance of common stock to vendor

Share-based expense

( 1,350,876 )

of September 30, 2021

$ 205,880,753

$ ( 180,705,585 )

$ ( 5,281,180 )

NINE MONTHS ENDED SEPTEMBER 30, 2021

Paid in Capital

Comprehensive Income

Stockholders' Equity

THREE MONTHS ENDED MARCH 31, 2022

Comprehensive

Stockholders'

Balance as of January 1, 2022

2 unchanged sentences

$ ( 5,281,180 )

Issuance of common stock and warrants,

net of issuance costs

Exercise of pre-funded warrants

Exercise of purchase warrants

Issuance of common stock to vendor

Share-based expense

Exercise of purchase warrants

( 1,593,611 )

of September 30, 2021

Balance as of March 31, 2022

$ 206,072,322

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'

(Unaudited) (Continued)

THREE MONTHS ENDED SEPTEMBER 30, 2020

Comprehensive

Stockholders'

Balance as of July 1,

$ 188,517,553

$ ( 168,141,691 )

$ ( 5,281,180 )

Share-based expense

( 7,560,370 )

of September 30, 2020

$ 188,628,352

$ ( 175,702,061 )

$ ( 5,281,180 )

NINE MONTHS ENDED SEPTEMBER 30, 2020

THREE MONTHS ENDED MARCH 31, 2021

Value ($0.001)

Comprehensive

2 unchanged sentences

( 176,902,086

$ ( 166,008,620 )

$ ( 5,281,180 )

Issuance of common stock to vendor

Share-based expense

Exercise of purchase warrants

( 9,693,441 )

of September 30, 2020

$ 188,628,352

$ ( 175,702,061 )

Balance as of March 31, 2021

( 178,248,031

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Adjustments to reconcile net loss to net cash used in operating activities:

Asset impairment charges

Deferred income taxes

( 2,918,518 )

Amortization of right of use asset

Gain on settlement with vendor

Share-based expense

5 unchanged sentences

( 1,519,188 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from issuance of common stock and warrants

Proceeds from exercise of warrants

Net cash provided by financing activities

Net change in cash

( 2,087,691 )

( 1,519,188 )

Cash at beginning of period

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SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Issuance of common stock to vendor

Issuance of common stock from cashless exercise of purchase warrants

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or the “Company”), incorporated in the state of Nevada and based in Framingham, Massachusetts, is a biopharmaceutical company

focused on progressing XCART ™ , a personalized Chimeric Antigen Receptor (“CAR”) T platform technology engineered

to target patient- and tumor-specific neoantigens.

The Company is initially advancing cell-based therapeutics targeting the unique B-cell

receptor on the surface of an individual patient’s malignant tumor cells, for the treatment of B-cell lymphomas.

The XCART technology,

developed by the Scripps Research Institute (“Scripps Research”) in collaboration with the Shemyakin-Ovchinnikov Institute

of Bioorganic Chemistry, is believed to have the potential to significantly enhance the safety and efficacy of cell therapy for B-cell

lymphomas by generating patient- and tumor-specific CAR T cells.

focused on advancing innovative immune-oncology technologies addressing hard to treat oncology indications.

The Company’s Deoxyribonuclease

(“DNase”) oncology platform, in development for the treatment of solid tumors, is aimed at improving outcomes of existing

treatments, including immunotherapies, by targeting Neutrophil Extracellular Traps (“NETs”).

The Company is also developing

its personalized Chimeric Antigen Receptor (“CAR”) T platform technology, XCART ™ , to develop cell-based therapeutics

targeting the unique B-cell receptor on the surface of an individual patient’s malignant tumor cells, for the treatment of B-cell

On April 26, 2022, the Company entered into exclusive license and sublicense agreements with CLS Therapeutics Ltd.

to develop its interventional DNase based oncology platform as more fully described in Note 11.

Additionally, Xenetic is leveraging its proprietary

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platform technology which can be applied to protein or peptide therapeutics.

It employs the natural polymer polysialic acid to prolong

a drug’s circulating half-life and potentially improve other pharmacological properties.

Xenetic incorporates its patented and proprietary

technologies into drug candidates currently under development with biotechnology and pharmaceutical industry collaborators to create what

the Company believes will be the next-generation biologic drugs with improved pharmacological properties over existing therapeutics.

PolyXen has demonstrated its ability to improve the half-life

and other pharmacological properties of next-generation biologic drugs.

The Company receives royalty payments under an exclusive license

arrangement in the field of blood coagulation disorders.

As used in this Quarterly Report on Form 10-Q

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SymbioTec, GmbH (“SymbioTec”), own various United States (“U.S.”) federal trademark registrations and applications

and unregistered trademarks and service marks, including but not limited to XCART, OncoHist™, PolyXen, ErepoXen™, and ImuXen™,

which are used throughout this Quarterly Report.

All other company and product names may be trademarks of the respective companies with

which they are associated.

along with unregistered trademarks and service marks, including but not limited to XCART, OncoHist™, PolyXen, ErepoXen™, and

ImuXen™, which are used throughout this Quarterly Report.

All other company and product names may be trademarks of the respective

companies with which they are associated.

Going Concern and Management’s Plan

Management evaluates whether there are conditions

or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern

within one year after the date that the financial statements are issued.

The Company has incurred substantial losses since its inception

and expects to continue to incur operating losses in the near-term.

These factors raise substantial doubt about its ability to continue

as a going concern.

The Company believes that it has access to capital resources through possible public or private equity offerings,

debt financings, corporate collaborations, related party funding, or other means to continue as a going concern.

On December 4, 2020,

the Company closed on a $6.0 million registered direct offering of the Company’s common stock, par value $0.001, resulting in $ 5.4

million of net proceeds to the Company.

On July 28, 2021, the Company completed a $12.5 million private placement of the Company’s

common stock, par value $0.001, resulting in approximately $ 11.5 million of net proceeds to the Company.

The Company believes that these

financings, coupled with the Company’s existing resources, will be adequate for the Company to continue as a going concern.

the Company anticipates it may need additional capital in the long-term to pursue its business initiatives.

The terms, timing and extent

of any future financing will depend upon several factors, including the achievement of progress in its clinical development programs,

its ability to identify and enter into licensing or other strategic arrangements, and factors related to financial, economic and market

or events, considered in the aggregate that raise substantial doubt about the Company’s ability to continue as a going concern within

one year after the date that the financial statements are issued.

The Company has incurred substantial losses since its inception and

expects to continue to incur operating losses in the near-term.

These factors raise substantial doubt about its ability to continue as

a going concern.

The Company believes that it has access to capital resources through possible public or private equity offerings, debt

financings, corporate collaborations, related party funding, or other means to continue as a going concern.

The Company believes that

its existing resources will be adequate to fund the Company’s operations into the second quarter of 2023.

However, the Company anticipates

it may need additional capital in the long-term to pursue its business initiatives.

The terms, timing and extent of any future financing

will depend upon several factors, including the achievement of progress in its clinical development programs, its ability to identify

and enter into licensing or other strategic arrangements, and factors related to financial, economic, geo-political, industry and market

conditions, many of which are beyond its control.

The capital markets for the biotech industry can be highly volatile, which make the

terms, timing and extent of any future financing uncertain.

Impact of COVID-19

During March 2020, a

global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus,

The pandemic has significantly affected economic conditions in the U.S., accelerating during the first half of March 2020

and continuing into 2021, as federal, state and local governments react to the public health crisis with mitigation measures, creating

global pandemic was declared by the World Health Organization related to the outbreak of a novel strain of coronavirus, or COVID-19.

pandemic has significantly affected economic conditions in the U.S., accelerating during the first half of March 2020 and continuing throughout

2020 and 2021 and into 2022, as federal, state and local governments reacted to the public health crisis with mitigation measures, creating

significant uncertainties in the U.S.

The Company continues to evaluate the effects of the COVID-19 pandemic on its business

and while there has been no significant impact to the Company’s operations to date, the Company at this time is uncertain of the

impact this event may have on the Company’s future operations.

The extent to which the COVID-19 pandemic affects our business, operations

and financial results will depend on numerous evolving factors that we may not be able to accurately predict, and such uncertainty is

expected to continue for some time.

and while there has been no significant impact to the Company’s operations to date, the Company at this time remains uncertain of

the impact this event may have on the Company’s future operations.

The extent to which the COVID-19 pandemic affects our business,

operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, and such uncertainty

is expected to continue for some time.

Summary of Significant Accounting Policies

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that are outstanding during the period, except where such non-participating securities would be anti-dilutive.

For the three and nine months ended September

30, 2021 and 2020, basic and diluted net loss per share are the same for each respective period due to the Company’s net loss position.

Potentially dilutive, non-participating securities have not been included in the calculations of diluted net loss per share, as their

inclusion would be anti-dilutive.

For the three months ended March 31, 2022 and

2021, basic and diluted net loss per share are the same for each respective period due to the Company’s net loss position.

dilutive, non-participating securities have not been included in the calculations of diluted net loss per share, as their inclusion would

be anti-dilutive.

Recent Accounting Standards

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after December 15, 2022, but early adoption is permitted.

The Company is currently evaluating the impact of adoption, but it does not anticipate

that it will have a material effect on the Company’s consolidated financial statements.

We are currently evaluating the impact of adoption, but we do not anticipate

that it will have a material effect on our consolidated financial statements.

Significant Strategic Collaborations

The Company has entered into various research,

development, license and supply agreements with Takeda Pharmaceuticals Co.

(“Takeda”), Serum Institute of India (“Serum

Institute”), Pharmsynthez and SynBio LLC (“SynBio”), a wholly owned subsidiary of Pharmsynthez.

The Company and its

collaborative partners continue to engage in research and development activities with no resultant commercial products through September

development, license and supply agreements with Serum Institute of India (“Serum Institute”), PJSC Pharmsynthez (“Pharmsynthez”)

and SynBio LLC (“SynBio”), a wholly owned subsidiary of Pharmsynthez.

The Company and its collaborative partners continue

to engage in research and development activities with no resultant commercial products through March 31, 2022.

No amounts were recognized

as revenue related to the Serum Institute, Pharmsynthez or SynBio agreements during the three months ended March 31, 2022 and 2021, respectively.

In October 2017, the Company granted to Takeda

the right to grant a non-exclusive sublicense to certain patents related to the Company’s PolyXen technology that were previously

exclusively licensed to Takeda in connection with products related to the treatment of blood and bleeding disorders.

Royalty payments

of approximately $ 0.3 million and $ 0.8 million were recorded as revenue by the Company during the three and nine months ended September

30, 2021, respectively, and approximately $ 0.1 million and $ 0.3 million were recorded as revenue by the Company during the three and nine

months ended September 30, 2020, respectively.

The Company’s policy is to recognize royalty payments as revenue when they are reliably

measurable, which is upon receipt of reports from Takeda.

The Company receives these reports in the quarter subsequent to the actual sublicensee

At the time the revenue was received, there were no remaining performance obligations and all other revenue recognition criteria

There are no active projects under the Exclusive Research, Development and License Agreement, dated August 15, 2005, by and

between Lipoxen and Baxter Healthcare SA, as amended, (the “Takeda Agreement”), and the parties mutually terminated the agreement

in August 2021.

The termination of the Takeda Agreement had no impact on the Company’s non-exclusive sublicense agreement and the

royalties being generated.

No amounts were recognized as revenue related to the Serum Institute, Pharmsynthez or SynBio agreements during

the three or nine months ended September 30, 2021 and 2020, respectively.

On May 15, 2020, the Company and Scripps Research

entered into a Research Funding and Option Agreement (the “Scripps Agreement”), pursuant to which the Company has agreed to

provide Scripps Research an aggregate of up to $3.0 million to fund research relating to advancing the pre-clinical development of XCART.

The research funding is payable by the Company to Scripps Research on a quarterly basis in accordance with a negotiated budget, which

provides for an initial payment of approximately $300,000 on the date of the Scripps Agreement and subsequent quarterly payments of approximately

$300,000 over a 27-month period.

Under the Scripps Agreement, Scripps Research has granted the Company a license within the Field (as

defined in the Scripps Agreement) to any Patent Rights or Technology (as defined in the Scripps Agreement) under the terms of that certain

license agreement with Scripps Research, dated February 25, 2019, assigned to the Company on March 1, 2019.

Additionally, the Company

has the option to acquire a worldwide exclusive license to Scripps Research’s rights in the Technology or Patent Rights not already

licensed to the Company, as well as a non-exclusive, royalty-free, non-transferrable license to make and use Scripps Research Technology

(as defined in the Scripps Agreement) solely for the Company’s internal research purposes during the performance of the research

program contemplated by the Scripps Agreement.

The Company has paid $ 1.8 million to Scripps Research under this agreement through September

As of September 30, 2021 and December 31, 2020, approximately $ 0.2 million has been recognized as an advance payment under this

agreement and is included in Prepaid expenses and other current assets.

Property and Equipment, net

Property and equipment, net consists of the following:

Schedule of Property and Equipment, Net

September 30,

Office and computer equipment

Furniture and fixtures

Property and equipment – at cost

Less accumulated depreciation

Property and equipment – net

There was no depreciation expense for the three

months ended September 30, 2021 and 2020.

There was no depreciation expense for the nine months ended September 30, 2021.

expense was approximately $ 800 for the nine months ended September 30, 2020.

Indefinite-Lived Intangible Assets

The Company’s indefinite-lived intangible

asset, OncoHist, is in-process research and development (“IPR&D”) relating to the Company’s business combination

with SymbioTec in 2012.

IPR&D is tested for impairment whenever events or changes in circumstances indicate that the carrying value

may not be recoverable, although it is to be tested at least annually until the project is completed or abandoned.

The Company completed

an impairment analysis of the IPR&D during 2020 and concluded that the following factors indicated that the IPR&D was impaired:

a decision by management to delay indefinitely any further development of the IPR&D and to not support the underlying intellectual

the failure to sell or license the IPR&D to a third party;

and the reduction in market capitalization.

The Company recorded

an asset impairment charge of $ 9.2

million during the third quarter of 2020 representing the excess of the IPR&D asset’s carrying value over its estimated

A reconciliation of the change in the carrying value of Indefinite-Lived Intangible Assets is as follows:

Schedule of Indefinite- Lived Intangible Asset

Balance as of January 1, 2020

( 9,243,128 )

Balance as of September 30, 2020

Pharmaceuticals Co.

(“Takeda”) the right to grant a non-exclusive sublicense to certain patents related to the Company’s

PolyXen technology that were previously exclusively licensed to Takeda in connection with products related to the treatment of blood and

bleeding disorders.

Royalty payments of approximately $ 0.4 million and $ 0.2 million were recorded as revenue by the Company during the

three months ended March 31, 2022 and 2021, respectively, and are based on single digit royalties on net sales of certain covered products.

The Company’s policy is to recognize royalty payments as revenue when they are reliably measurable, which is upon receipt of reports

The Company receives these reports in the quarter subsequent to the actual sublicensee sales.

At the time the revenue was

received, there were no remaining performance obligations and all other revenue recognition criteria were met.

On May 15, 2020, the Company and The Scripps Research

Institute (“Scripps Research”) entered into a Research Funding and Option Agreement (the “Scripps Agreement”),

pursuant to which the Company has agreed to provide Scripps Research an aggregate of up to $3.0 million to fund research relating to advancing

the pre-clinical development of XCART.

The research funding is payable by the Company to Scripps Research on a quarterly basis in accordance

with a negotiated budget, which provides for an initial payment of approximately $300,000 on the date of the Scripps Agreement and subsequent

quarterly payments of approximately $300,000 over a 27-month period.

Under the Scripps Agreement, Scripps Research has granted the Company

a license within the Field (as defined in the Scripps Agreement) to any Patent Rights or Technology (as defined in the Scripps Agreement)

under the terms of that certain license agreement with Scripps Research, dated February 25, 2019, assigned to the Company on March 1,

Additionally, the Company has the option to acquire a worldwide exclusive license to Scripps Research’s rights in the Technology

or Patent Rights not already licensed to the Company, as well as a non-exclusive, royalty-free, non-transferrable license to make and

use Scripps Research Technology (as defined in the Scripps Agreement) solely for the Company’s internal research purposes during

the performance of the research program contemplated by the Scripps Agreement.

The Company has paid $ 2.4 million to Scripps Research under

this agreement through March 31, 2022.

As of March 31, 2022 and December 31, 2021, approximately $ 0.2 million has been recognized as an

advance payment under this agreement and is included in prepaid expenses and other current assets.

Fair Value Measurements

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at the measurement date.

The carrying amount of certain of the Company’s financial instruments approximate fair value due to their

short maturities.

As of September 30, 2021 and December 31, 2020, the carrying amounts of the Company’s financial instruments approximates

fair value due to their short maturities.

There were no financial instruments classified as Level 3 in the fair value hierarchy during

the three and nine months ended September 30, 2021 and 2020.

As of March 31, 2022 and December 31, 2021, the carrying amounts of the Company’s financial instruments

approximates fair value due to their short maturities.

There were no financial instruments classified as Level 3 in the fair value hierarchy

during the three months ended March 31, 2022 and 2021.

Stockholders’ Equity

Private Placement

On July 26, 2021, the Company entered into a securities

purchase agreement in connection with a private placement with the purchaser named on the signature page thereto (“Purchaser”),

pursuant to which the Company issued and sold to Purchaser, in a private placement priced at-the-market under Nasdaq rules, (i) 950,000

shares of the Company’s common stock, par value $0.001 per share (the “Shares”), (ii) warrants to purchase an aggregate

of 4,629,630 shares of the Company’s common stock, with an exercise price of $3.30 per share (the “Series A Warrants”)

which expire three and one half years from the earlier of (a) the six month anniversary of the initial exercise date and (b) the date

that the registration statement registering all of the warrant shares underlying the Series A Warrants is declared effective, and (iii) pre-funded warrants

to purchase up to 3,679,630 shares of the Company’s common stock, with an exercise price of $0.001 per share (the “Series

B Warrants”) with no expiration (the “Private Placement”), at a purchase price of $2.70 per one Share and one Series

A Warrant and $2.699 per one Series B Warrant and one Series A Warrant.

The Private Placement closed on July 28, 2021 resulting in gross

proceeds from the Private Placement of approximately $12.5 million, before deducting placement agent fees and offering expenses, and excluding

the exercise of any such warrants.

Net proceeds from the Private Placement were $ 11.5 million.

On July 26, 2021, in connection with the Private

Placement, the Company entered into a registration rights agreement with Purchaser, pursuant to which the Company filed a registration

statement on Form S-3 to register for resale the Shares, as well as the shares of the Company’s common stock issuable upon exercise

of the Series A Warrants and the Series B Warrants, which was declared effective on August 23, 2021.

In connection with certain of the Company’s

collaboration agreements and consulting arrangements, the Company has issued warrants to purchase shares of common stock as payment for

As of September 30, 2021 and December 31, 2020, collaboration warrants to purchase 0 and 30,307 shares of common stock were

No collaboration warrants were granted or exercised in connection with collaboration or consulting services during the three

and nine months ended September 30, 2021.

Collaboration warrants to purchase 30,307 shares expired during the nine months ended September

No collaboration warrants were granted or exercised and none expired in connection with collaboration or consulting services

during the three and nine months ended September 30, 2020, respectively.

B Warrants are immediately exercisable at a price of $0.001 per share of Common Stock.

The holders of the Series B Warrants will not have

the right to exercise any portion of the Series B Warrants if the holder (together with its affiliates) would beneficially own in excess

of 4.99% of the number of shares of our Common Stock outstanding immediately after giving effect to the exercise, as such percentage

ownership is determined in accordance with the terms of the Series B Warrants.

The holder, upon notice to the Company, may increase or

decrease the beneficial ownership limitation provisions, provided that the beneficial ownership limitation in no event exceeds 9.99% of

the number of shares of the common stock outstanding immediately after giving effect to the issuance of shares of common stock upon exercise

of a Warrant held by the holder.

Any increase in the beneficial ownership limitation will not be effective until the 61st day after notice

is delivered to the Company.

The Series B Warrants had an intrinsic value of approximately $ 9.3 million.

the three and nine months ended September 30, 2021, Series B Warrants to purchase 3,679,630

shares of Common Stock were exercised resulting in $ 3,679 of net proceeds to the Company.

As a result, no Series B Warrants were outstanding

as of September 30, 2021.

A Warrants are immediately exercisable at a price of $3.30 per share of Common Stock.

The holders of the Series A Warrants will not have

the right to exercise any portion of the Series A Warrants if the holder (together with its affiliates) would beneficially own in excess

of 4.99% of the number of shares of our Common Stock outstanding immediately after giving effect to the exercise, as such percentage

ownership is determined in accordance with the terms of the Series A Warrants.

The holder, upon notice to the Company, may increase or

decrease the beneficial ownership limitation provisions, provided that the beneficial ownership limitation in no event exceeds 9.99% of

the number of shares of the common stock outstanding immediately after giving effect to the issuance of shares of common stock upon exercise

of a Warrant held by the holder.

Any increase in the beneficial ownership limitation will not be effective until the 61st day after notice

is delivered to the Company.

The Company evaluated the terms of the warrants issued and determined

that they should be classified as equity instruments.

The grant date fair value of these warrants was estimated to be $1.98 per share,

for a total of approximately $9.2 million.

The fair value of these warrants was estimated using a Black-Scholes model utilizing the following

key valuation assumptions:

the Company’s stock price, a risk free rate of 0.49%, an expected life of 3.6 years and an expected volatility

No Series A Warrants were exercised during the three and nine months ended September 30, 2021.

In addition, the Company has outstanding warrants

to purchase an aggregate of 333,424 and 378,453 shares of common stock in connection with debt and equity financing arrangements as of

September 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021, these warrants have an average weighted exercise price

of $ 36.14 per share and expiration dates ranging from November 2021 through September 2026.

No debt and equity financing warrants were

granted during the three and nine months ended September 30, 2021 and 2020 other than the Series A and Series B Warrants issued in connection

with the Private Placement.

During the three and nine months ended September 30, 2021, debt and equity financing warrants to purchase

approximately 2,547 and 4,032 shares of common stock, respectively, were exercised on a cashless one-for-one basis.

During the nine months

ended September 30, 2020, debt and equity financing warrants to purchase approximately 0.2 million shares of common stock were exercised

on a cashless one-for-one basis.

No debt and equity financing warrants were exercised during the three months ended September 30, 2020.

In addition, approximately 12,000 and 41,000 debt and equity warrants expired during the three and nine months ended September 30, 2021.

During the three and nine months ended September 30, 2020, approximately 0.1 million of debt and equity warrants expired.

In connection

with its July 2021 private placement, the Company issued warrants to purchase an aggregate of 4,629,630 shares of the Company’s

common stock (the “Series A Warrants”).

The Series A Warrants are immediately exercisable at a price of $ 3.30 per share of

common stock and expire on February 23, 2025 .

No Series A Warrants were exercised or forfeited during the three months ended March 31,

In addition to the Series A Warrants, warrants

to purchase approximately 29,000 and 31,000 shares of the Company’s common stock were outstanding as of March 31, 2022 and December

31, 2021, respectively, as described below.

Publicly traded warrants to purchase approximately

21,000 and 23,000 shares of common stock were outstanding as of March 31, 2022 and December 31, 2021, respectively.

These warrants have

an exercise price of $ 13.00 per share and expire on July 17, 2024 .

The warrants trade on NASDAQ under the symbol “XBIOW.”

The warrants also provide that if the weighted-average price of common stock on any trading day on or after 30 days after issuance is

lower than the then-applicable exercise price per share, each warrant may be exercised, at the option of the holder, on a cashless basis

for one share of common stock.

Warrants to purchase approximately 1,684 shares and 1,485 shares of common stock were exercised on a cashless,

one-for-one basis during the three months ended March 31, 2022 and 2021, respectively.

No ne of these warrants were forfeited during the

three months ended March 31, 2022 and 2021.

Warrants to purchase approximately 8,000 shares

of the Company’s common stock were outstanding as of March 31, 2022 and December 31, 2021.

These warrants have an exercise price

of $ 2.91 per share and expire on July 3, 2026 .

None of these warrants were exercised or forfeited during the three months ended March

31, 2022 and 2021.

Share-Based Expense

Total share-based expense related to stock options

restricted stock units (“RSUs”) and common stock awards was approximately $ 0.1 million during the three months ended September

30, 2021 and 2020 and approximately $ 0.3 million and $ 0.4 million for the nine months ended September 30, 2021 and 2020, respectively.

Share-based compensation expense is classified in the condensed consolidated

statements of operations as follows:

and restricted stock units (“RSUs”) was approximately $ 0.1 million during each of the three months ended March 31, 2022 and

Share-based expense is classified in the condensed

consolidated statements of operations as follows:

Schedule of Share-Based Compensation Expense

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Research and development expenses

1 unchanged sentence

Employee Stock Options

During the nine months ended September 30, 2021,

During the three months ended March 31, 2022,

the Company granted 200,000 stock option awards to purchase shares of common stock.

1 unchanged sentence

share was $ 0.99 .

Key assumptions used in the Black-Scholes option pricing model for options granted during the nine months ending September

Key assumptions used in the Black-Scholes option pricing model for options granted during the three months ending March

31, 2022 were the Company’s stock price, a risk free rate of 2.38 %, an expected life of 5.88

years and an expected volatility rate of 126.32 %.

There were no employee stock options or RSUs granted or exercised during the

nine months ended September 30, 2020.

The Company recognized a total of $ 0.1 million of compensation expense related to employee stock

options during the three months ended September 30, 2021 and 2020 and $ 0.3 million and $ 0.4 million during the nine months ended September

30, 2021 and 2020, respectively.

D uring the three months ended March 31, 2021, the Company granted 200,000 stock

option awards to purchase shares of common stock.

The Company recognized a total of approximately $ 0.1 million of compensation expense

related to employee stock options during each of the three months ended March 31, 2022 and 2021, respectively.

No employee stock options

or RSUs were exercised and none expired during the three months ended March 31, 2022 and 2021.

Non-Employee Stock Options

The Company did not grant any non-employee stock

options during the three and nine months ended September 30, 2021 and 2020.

The Company did not recognize any expense related to non-employee

stock options during the three and nine months ended September 30, 2021.

The Company recognized approximately $ 4,000 and $ 11,000 of expense

during the three and nine months ended September 30, 2020, respectively.

Common Stock Awards

The Company did not grant any common stock awards

during the three and nine months ended September 30, 2021 and September 30, 2020, respectively.

During the three and nine months ended

September 30, 2021, the Company issued 7,153 shares related to common stock awards.

During the nine months ended September 30, 2020, the

Company issued 1,188 shares related to common stock awards.

As of September 30, 2021, there were 253 common stock awards authorized but

During the three and nine months ended September

There were no non-employee stock options granted

or exercised and none expired during the three months ended March 31, 2022 and 2021, respectively.

The Company did not recognize any expense

related to non-employee stock options during the three months ended March 31, 2022 and 2021, respectively.

During the three months ended March 31, 2022 and

2021, there was no provision for income taxes as the Company incurred losses during both periods.

During the three and nine months

ended September 30, 2020, the Company recorded an income tax benefit of $2.9 million related to a net deferred tax liability that was

eliminated due to the impairment of certain intangible assets.

Deferred tax assets and liabilities reflect the net tax effect of temporary

differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax

The Company records a valuation allowance against its deferred tax assets as the Company believes it is more likely than not

the deferred tax assets will not be realized.

The valuation allowance against deferred tax assets was approximately $ 30.5 million and

$ 29.6 million as of September 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021 and December 31,

Deferred tax assets and liabilities

reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes

and the amounts used for income tax purposes.

The Company records a valuation allowance against its deferred tax assets as the Company

believes it is more likely than not the deferred tax assets will not be realized.

The valuation allowance against deferred tax assets

was approximately $ 31.8 million and $ 31.4 million as of March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022 and December 31, 2021,

the Company did no t record any unrecognized tax positions.

2 unchanged sentences

Cash flow information regarding leases

September 30,

Operating cash flow information:

1 unchanged sentence

Supplemental balance sheet information related

to our operating leases are as follows:

to our operating leases is as follows:

Supplemental information related to operating leases

Balance Sheet Classification

September 30, 2021

March 31, 2022

March 31, 2021

Right-of-use assets - ST

7 unchanged sentences

The Company has entered into various research,

development, license and supply agreements with Serum Institute and Pharmsynthez (as well as SynBio), each a related party whose relationship

has not materially changed from that disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020,

filed with the SEC on March 16, 2021, as amended on April 28, 2021, except as otherwise set forth below.

development, license and supply agreements with Serum Institute and Pharmsynthez, each a related party whose relationship has not materially

changed from that disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC

on March 22, 2022, as amended on April 28, 2022.

During the fourth quarter

1 unchanged sentence

advanced Pharmsynthez an aggregate principal amount of up to $ 500,000 to be used for the development of a specific product under the Company’s

co-development agreement with SynBio.

Co-Development Agreement with Pharmsynthez.

The Pharmsynthez Loan had a term of 15-months and accrued interest at a rate of 10 % per annum.

Pharmsynthez Loan is guaranteed by all of the operating subsidiaries of Pharmsynthez, including SynBio and AS Kevelt, and is secured by

all of the equity interests of the Company owned by Pharmsynthez and SynBio.

The Company recognized approximately $ 12,000 and $ 35,000

of interest income related to this loan during the three and nine months ended September 30, 2021, respectively.

The Company recognized

approximately $ 13,000 and $ 38,000 of interest income related to this loan during the three and nine months ended September 30, 2020, respectively.

The Pharmsynthez Loan is guaranteed by all of the operating subsidiaries of Pharmsynthez, including SynBio and AS Kevelt, and is secured

by all of the common and preferred stock of the Company owned by Pharmsynthez and SynBio.

The Company recognized approximately $ 9,000

and $ 12,000 of interest income related to this loan during the three months ended March 31, 2022 and 2021, respectively.

Effective January 23, 2021, the Company entered

7 unchanged sentences

from August 2021 through January 2022.

All other terms of the Pharmsynthez Loan remain in effect.

Subsequent to the third quarter of 2021, the Company

entered into a Second Amendment to Loan Agreement and Other Loan Documents, effective August 31, 2021, with Pharmsynthez, Kevelt and SynBio

(the “Second Pharmsynthez Loan Extension”) to modify the repayment terms and maturity of the Pharmsynthez Loan to July 2022.

The terms of the Second Pharmsynthez Loan Extension call for an upfront fee of $ 12,500 and two (2) equal monthly principal payments of

$ 25,000 in September 30, 2021 and October 31, 2021.

In addition, the Second Pharmsynthez Loan Extension requires monthly interest payments

and the repayment of the remaining principal amount in six (6) equal monthly installments from February 2022 through July 2022.

terms of the Pharmsynthez Loan, as amended, remain in effect.

All required payments under the Second Pharmsynthez Loan Extension have

been made to date.

As of September 30, 2021, approximately $ 0.4 million was included in Prepaid expenses and other on the condensed consolidated

balance sheet.

As of December 31, 2020, approximately $ 0.5 million was classified within Prepaid expenses and other and approximately

$ 0.1 million was classified within Other assets on the consolidated balance sheet.

During the third quarter of 2019, the Company

entered into a Sponsored Research Agreement with Pharmsynthez (the “SRA”) related to experiments identified by the Company

to support its efforts for initial tech transfer of the XCART methods to a future academic collaborator.

Under the agreement, the Company

made a $ 350,000 payment to Pharmsynthez during the third quarter of 2019, which was refundable on pro rata basis if the project is terminated

prematurely as a result of Pharmsynthez failing to perform the work.

On June 12, 2020, the Company and Pharmsynthez entered into a Master

Services Agreement (“MSA”) to advance the development of the Company’s XCART technology for B-cell malignancies.

MSA terminated and superseded the SRA.

The Company expensed approximately $ 0.1 million and $ 0.2 million related to work performed under

these agreements during the nine months ended September 30, 2021 and 2020, respectively.

No expense was recorded during the three months

ended September 30, 2021 and 2020.

As of September 30, 2021, approximately $ 40,000 was accrued and included in Accrued expenses and other

current liabilities on the condensed consolidated balance sheet.

As of December 31, 2020, approximately $ 25,000 was recorded as an advanced

payment and included in Prepaid expenses and other on the consolidated balance sheet.

Under the MSA, Pharmsynthez agreed to provide

services pursuant to work orders agreed upon by the parties from time to time, which services include, but are not limited to, acting

as the Company’s primary contract research organization to assist in managing collaborations with multiple academic institutions

in Russia and Belarus.

The Company is required to pay reasonable fees, expenses and pass-through costs incurred by Pharmsynthez in providing

the services in accordance with a budget and payment terms set forth in each work order.

Additionally, in the event that a work order

provides for milestone payments, the Company is required to make such payments to Pharmsynthez, or third party service providers designated

by Pharmsynthez, in accordance with the terms set forth in the work order, which milestone payments may be made, at the sole discretion

of the Company, in cash or shares of the Company’s common stock.

The Company and Pharmsynthez executed a work order

on June 12, 2020 (the “Work Order”) under the MSA pursuant to which Pharmsynthez agreed to conduct a Stage 1 study of the

Company’s XCART technology under the research program as set forth in the Work Order.

The activities to be performed under the Work

Order were expected to take approximately 20 months unless earlier terminated in accordance with the MSA.

Under the terms of the Work

Order, the Company paid Pharmsynthez $51,000 as an initial payment for trial startup costs, which amount was credited against the amounts

paid under the SRA.

The Work Order provided for additional pass-through costs to be invoiced by Pharmsynthez upon execution of contracts

with third party sites, which were to be further credited against the SRA.

Through September 30, 2021, all costs incurred under the MSA

were credited against the amounts paid under the SRA.

Additionally, the Work Order provided for milestone payments of up to an aggregate

of $1,050,000, or, in the Company’s sole discretion, up to an aggregate of 1,000,000 shares of the Company’s common stock,

to be paid or issued, as applicable, by the Company upon achievement of milestones associated with completion of early stages of the research

program as set forth in the Work Order.

As of September 30, 2021, approximately $0.1 million of milestone payments had been paid.

On October 12, 2021, the Company entered into

an Amendment Number One to the Master Services Agreement (the “MSA Amendment”) with Pharmsynthez to, among other things, terminate

all work orders under the MSA.

As a result, no further services were to be performed under the Work Order and any additional services

will be covered by new work orders.

In exchange, the Company entered into a new work order (the “Second Work Order”) simultaneously

with the MSA Amendment.

Under the terms of the Second Work Order, Pharmsynthez shall provide certain enumerated services to support the

Company’s development of its XCART technology upon the written request of the Company, which work may be requested by the Company

from time to time.

Pursuant to the MSA Amendment and Second Work

Order, upon entry into the Second Work Order, the Company made a one-time $40,000 payment to Pharmsynthez, of which $21,000 was a one-time

payment in full for all money and other compensation owed by the Company under the Work Order, and the remaining $19,000 will be creditable

against any out of pocket costs and expenses incurred by Pharmsynthez on behalf of the Company pursuant to any new work orders initiated

after the effective date of the MSA Amendment, including the Second Work Order.

Effective August 31, 2021, the Company entered

into a Second Amendment to Loan Agreement and Other Loan Documents with Pharmsynthez, Kevelt and SynBio (the “Second Pharmsynthez

Loan Extension”) to modify the repayment terms and maturity of the Pharmsynthez Loan to July 2022.

The terms of the Second Pharmsynthez

Loan Extension called for an upfront fee of $ 12,500 and two (2) equal monthly principal payments of $ 25,000 on September 30, 2021 and

October 31, 2021.

In addition, the Second Pharmsynthez Loan Extension required monthly interest payments and the repayment of the remaining

principal amount in six (6) equal monthly installments from February 2022 through July 2022.

All other terms of the Pharmsynthez Loan,

as amended, remain in effect.

All required payments under the Second Pharmsynthez Loan Extension had been made through January 31, 2022.

In February 2022, the Company received a request from Pharmsynthez to further extend the principal repayments until September 2022.

Company agreed to extend the maturity date, although final terms of such extension are under negotiation.

All other terms of the Pharmsynthez

Loan, as amended, are expected to remain in effect.

As a result of this request and the current economic uncertainty due to the conflict

between Russia and Ukraine and associated sanctions imposed by the U.S.

and other countries in response, the Company has classified the

loan receivable as long-term as of March 31, 2022 and December 31, 2021.

The Company assessed the collectability of the loan and determined

that the collateral held by the Company, consisting of all of the common and preferred stock of the Company owned by Pharmsynthez and

SynBio, was adequate to support the outstanding principal balance.

As of March 31, 2022 and December 31, 2021, approximately $ 0.4 million

was included in other assets on the condensed consolidated balance sheet.

In April 2022, the Company agreed to license certain

technology from CLS as described in Note 11.

One of the Company’s directors, Roger Kornberg, is a member of the scientific advisory

board of CLS, however, Mr.

Kornberg does not own any equity of CLS and is not receiving any economic benefit as a result of the transactions

contemplated by the License Agreement and Sublicense Agreement.

Adam Logal, one of our directors, is Senior Vice President, Chief

Financial Officer, Chief Accounting Officer and Treasurer of OPKO Health, Inc.

Subsequent Events

The Company performed a review of events subsequent

to the balance sheet date through the date the financial statements were issued and determined that other than described in Note 12, there

were no other such events requiring recognition or disclosure in the financial statements.

to the balance sheet date through the date the financial statements were issued and determined that there were no such events requiring

recognition or disclosure in the financial statements except as described below.

Exclusive Sublicense Agreement

On April 26, 2022, the Company entered into an

Exclusive Sublicense Agreement (the “Sublicense Agreement”) with CLS pursuant to which the Company received an exclusive license,

under certain patent rights and know-how owned or controlled by CLS, to develop and commercialize pharmaceutical products and methods

incorporating DNase enzyme for use in treatment of cancer (the “Sublicensed Products”).

Under the terms of the Sublicense

Agreement, the Company will have sole responsibility for, and shall use commercially reasonable efforts to, among other things, research,

develop and obtain marketing approval for the Sublicensed Products in the U.S.

and certain European markets, and to commercialize such

Sublicensed Products in the relevant market once marketing approval is obtained.

In consideration for the license and other rights

granted to the Company under the Sublicense Agreement, the Company issued to CLS 375,000 shares of the Company’s common stock (the

“Sublicense Agreement Shares”), of which 250,000 Sublicense Agreement Shares were issued directly to OPKO in lieu of transfer

indirectly from CLS to EirGen Pharma Ltd.

(“EirGen”), a wholly owned subsidiary of OPKO, in satisfaction of certain third-party

contractual obligations between CLS and EirGen.

Additionally, the Company is obligated to pay to CLS up to $13,000,000 in cash in potential

milestone payments for the achievement of certain clinical and regulatory milestones, as well as issue an additional 950,000 shares of

the Company’s common stock to CLS based on the achievement of certain regulatory milestones.

In addition, the Company is obligated

to pay tiered royalties ranging from the mid-single to low-double digits on net sales of licensed products falling within the scope of

the license during the Royalty Term (as defined in the Sublicense Agreement), as well as pay a percentage share in the low-to-mid teens

of certain consideration received by the Company from any sublicensees.

Exclusive License Agreement

On April 26, 2022, the Company entered into an

Exclusive License Agreement (the “License Agreement”) with CLS, pursuant to which the Company received an exclusive license

under certain patent rights and know-how owned or controlled by CLS to develop and commercialize pharmaceutical products and methods incorporating

DNase in conjunction with CAR T therapies (the “Licensed Products”).

Under the terms of the License Agreement, the Company

will have sole responsibility for, and shall use commercially reasonable efforts to, among other things, research, develop and obtain

marketing approval for the Licensed Products in the U.S.

and certain European markets, and to commercialize such Licensed Products in

the relevant market once marketing approval is obtained.

In consideration for the license and other rights

granted to the Company under the License Agreement, the Company paid CLS a one-time fee of $500,000 in cash, issued to CLS 500,000 shares

of the Company’s common stock, and is obligated to pay up to $13,000,000 in cash in potential milestone payments for the achievement

of certain clinical and regulatory milestones for each Licensed Product.

In addition, the Company is obligated to pay tiered royalties

ranging from the mid-single to low-double digits on net sales of licensed products falling within the scope of the license during the

Royalty Term (as defined in the License Agreement), as well as pay a percentage share in the mid-teens to low double digits of certain

consideration received by the Company from any sublicensees.

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

What changed 10-Q

Item 1. Financial Statements