What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-12 compared with 2021-11-12 · 165 added, 263 removed, 128 unchanged (77% of the section changed)

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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These forward-looking statements

include, but are not limited to, statements concerning the anticipated effects and duration of the novel coronavirus, or COVID-19, global

include, but are not limited to, statements concerning:

the anticipated effects and duration of the novel coronavirus, or COVID-19, global

pandemic and the responses thereto, including the pandemic’s impact on general economic and market conditions, as well as on our

business, results of operations and financial condition;

the uncertainty due to the conflict between Russia and Ukraine and associated

sanctions imposed by the United States (“U.S.”) and other countries in response;

our plans to develop our proposed drug candidates;

our expectations regarding

the nature, timing and extent of clinical trials and proposed clinical trials;

our expectations regarding the timing for proposed submissions

of regulatory filings, including, but not limited to, any Investigational New Drug filing or any New Drug Application;

the nature, timing

and extent of collaboration arrangements;

the expected results pursuant to collaboration arrangements including the receipts of future

payments that may arise pursuant to collaboration arrangements;

the outcome of our plans to obtain regulatory approval of our drug candidates;

our expectations regarding the nature, timing and extent of clinical trials and proposed clinical trials;

our expectations regarding the

timing for proposed submissions of regulatory filings, including but not limited to, any Investigational New Drug filing or any New Drug

the nature, timing and extent of collaboration arrangements;

the expected results pursuant to collaboration arrangements,

including the receipts of future payments that may arise pursuant to collaboration arrangements;

the outcome of our plans to obtain regulatory

approval of our drug candidates;

the outcome of our plans for the commercialization of our drug candidates;

our plans to address certain markets, engage third party manufacturers,

and evaluate additional drug candidates for subsequent commercial development, and the likelihood and extent of competition to our drug

the development of the XCART ™ Chimeric Antigen Receptor (“CAR”) T technology;

our plans to apply

the XCART technology to advance cell-based therapeutics by targeting the unique B cell receptor on the surface of an individual patient’s

malignant tumor cells for the treatment of B-cell lymphomas;

our beliefs regarding the expected results of the XCART technology, including

its potential to significantly enhance the safety and efficacy of cell therapy for B-cell lymphomas by generating patient- and tumor-specific

and our anticipation that our primary focus will now be on advancing the XCART technology through regulatory approval and

commercialization.

our plans to address certain

markets, engage third party manufacturers, and evaluate additional drug candidates for subsequent commercial development along with the

likelihood and extent of competition to our drug candidates;

our plans to advance innovative immune-oncology technologies addressing hard

to treat oncology indications;

expectations regarding our Deoxyribonuclease (“DNase”) oncology platform, such as regarding

the DNase platform being in development for the treatment of solid tumors and being aimed at improving outcomes of existing treatments,

including immunotherapies, by targeting Neutrophil Extracellular Traps (“NETs”) and our expectations to prioritize our efforts

and resources on this newly acquired technology;

the development of the XCART ™ Chimeric Antigen Receptor (“CAR”)

T cell technology and plans to develop cell-based therapeutics by targeting the unique B cell receptor on the surface of an individual

patient’s malignant tumor cells for the treatment of B-cell lymphomas;

and our expectations regarding our PolyXen ®

platform, including concerning our plans to leverage the platform by partnering with biotechnology and pharmaceutical companies and its

application to protein or peptide therapeutics and its application to improve the half-life and other pharmaceutical properties of next-generation

biologic drugs.

In some cases, these statements may be identified

by terminology such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”,

“believe”, “estimate”, “predict”, “potential”, or “continue”, or the negative

by terminology such as “may,” “will,” “would,” “could,” “should,” “expect,”

“plan,” “anticipate,” “believe,” “estimate,” “seek,” “approximately,”

“intend,” “predict,” “potential,” “projects,” or “continue,” or the negative

of such terms and other comparable terminology.

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These statements

involve known and unknown risks and uncertainties that may cause our or our industry’s results, levels of activity, performance

or achievements to be materially different from those expressed or implied by forward-looking statements.

involve known and unknown risks and uncertainties that may cause our or our industry's results, levels of activity, performance or achievements

to be materially different from those expressed or implied by forward-looking statements.

The Management’s Discussion and Analysis

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risks and uncertainties and should not be considered as guarantees of future performance.

Some factors that could cause actual results to

differ materially include without limitation:

failure to realize the anticipated potential of the XCART or PolyXen technology;

Some factors that could

cause actual results to differ materially include without limitation:

unexpected costs, charges or expenses resulting from the transaction with CLS Therapeutics LTD (“CLS”) and the licensing of the DNase platform;

uncertainty of the expected financial performance of the Company following completion of the transaction with CLS and the licensing of the DNase platform;

failure to realize the anticipated potential of the DNase, XCART or PolyXen technologies;

our ability to implement our business strategy;

the failure of the holder to exercise the warrants issued in the Private Placement;

our use of proceeds from the Private Placement and warrant exercise;

our need to raise additional working capital in the future for the purpose of further developing our XCART technology and to continue as a going concern;

our need to raise additional working capital in the future for the purpose of further developing our DNase and XCART technologies and to continue as a going concern;

our ability to finance our business;

our ability to successfully execute, manage and integrate key acquisitions and mergers;

product development and commercialization risks, including our ability to successfully develop the XCART technology;

the impact of adverse safety outcomes and clinical trial results for CAR-T cell therapies;

our ability to secure and maintain a manufacturer for the XCART technology;

product development and commercialization risks, including our ability to successfully develop the DNase and XCART technologies;

the impact of adverse safety outcomes and clinical trial results for our therapies;

our ability to secure and maintain a manufacturer for our technologies;

the impact of new therapies and new uses of existing therapies on the competitive environment;

our ability to successfully commercialize our current and future drug candidates;

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the costs inherent with complying with statutes and regulations applicable to public reporting companies, such as the Sarbanes-Oxley Act of 2002;

other new lines of business that we may enter in the future;

other new lines of business that the Company may enter in the future;

general economic and business conditions, as well as inflationary trends;

the impact of natural disasters or public health emergencies, such as the COVID-19 global pandemic (including any new variant strains of the underlying virus), on our financial condition and results of operations;

the impact of natural disasters or public health emergencies, such as the COVID-19 global pandemic, and geopolitical events, such as the Russian invasion of Ukraine, and related sanctions and other economic disruptions or concerns, on our financial condition and results of operations;

other factors set forth in the Risk Factors section of our Annual Report on Form 10-K and in subsequent filings with the Securities and Exchange Commission (“SEC”).

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We are a biopharmaceutical company focused on

progressing XCART ™ , a personalized CAR T platform technology engineered to target patient- and tumor-specific neoantigens.

We are 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.

XCART has the potential to fuel a robust pipeline of the therapeutic assets

targeting high-value oncology indications.

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.

We are currently

advancing XCART preclinical efforts through strategic collaborations, including with Scripps Research and Pharmsynthez.

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

The Company’s DNase oncology platform,

in development for the treatment of solid tumors, is aimed at improving outcomes of existing treatments, including immunotherapies, by

targeting NETs.

The Company is also developing its personalized 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 lymphomas.

We acquired the DNase oncology platform in April 2022 and expect to prioritize our efforts and resources on the development

of this newly acquired technology.

Additionally, we are leveraging our proprietary

drug delivery platform, PolyXen, by partnering with biotechnology and pharmaceutical companies.

PolyXen is an enabling

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

It employs the natural polymer polysialic acid to prolong

PolyXen is an enabling platform technology

which can be applied to protein or peptide therapeutics.

It employs the natural polymer polysialic acid (“PSA”) to prolong

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

We incorporate our patented and proprietary technologies

into a number of drug candidates currently under development with biotechnology and pharmaceutical industry collaborators to create what

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

Our drug candidates

have resulted from our research activities or that of our collaborators and are in the development stage.

As a result, we continue to

commit a significant amount of our resources to our research and development activities and anticipate continuing to do so for the near

To date, none of our drug candidates have received regulatory marketing authorization in the United States (“U.S.”)

by the Food and Drug Administration nor in any other territories by any applicable agencies.

We are receiving ongoing royalties pursuant

to a license of our PolyXen technology to an industry partner.

Although we hold a broad

patent portfolio, the focus of our internal development efforts during the three and nine months ended September 30, 2021 was on advancing

the development of our XCART platform technology.

Critical Accounting Estimates

The preparation of our financial statements in

conformity with U.S.

generally accepted accounting principles (“U.S.

GAAP”) requires us to make estimates, judgments and assumptions

that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue,

costs and expenses during the reporting period.

On an ongoing basis, we evaluate our estimates that are based on historical experience

and on various other assumptions that we believe to be reasonable under the circumstances.

The result of these evaluations forms the basis

for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent

from other sources.

Because future events and their effects cannot be determined with certainty, actual results and outcomes could differ

materially from our estimates, judgments and assumptions.

There has been no material change to our critical

accounting estimates since those critical accounting estimates described in our 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.

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

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

Our drug candidates have

resulted from our research activities or that of our collaborators and are in the development stage.

As a result, we continue to commit

a significant amount of our resources to our research and development activities and anticipate continuing to do so for the near future.

To date, none of our drug candidates have received regulatory marketing authorization in the U.S.

by the Food and Drug Administration

(“FDA”) nor in any other territories by any applicable agencies.

We are receiving ongoing royalties pursuant to a license

of our PolyXen technology to an industry partner.

Although we hold a broad patent portfolio, the focus of our internal development efforts

during the three months ended March 31, 2022, was on advancing the development of our XCART platform technology.

Effects of the COVID-19 Pandemic

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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 significant uncertainties in

We continue to evaluate the effects of the COVID-19 pandemic on our business, and while our operations were not materially

affected during the three and nine months ended September 30, 2021 despite social distancing and other measures taken in response to the

pandemic, the ultimate impact of the COVID-19 pandemic on our results of operations and financial condition is dependent on future developments,

including the duration of the pandemic and the related extent of its severity, the pace and rate at which vaccines are administered, as

well as its impact on macroeconomic conditions, which are uncertain and cannot be predicted at this time.

If the global response to contain

the COVID-19 pandemic escalates further or is unsuccessful, or if governmental decisions to ease pandemic related restrictions are ineffective,

premature or counterproductive, we could experience a material adverse effect on our business, financial condition, results of operations

and cash flows.

significantly affected economic conditions in the U.S., accelerating during the first half of March 2020 and continuing throughout 2021

and into 2022, as federal, state and local governments react to the public health crisis with mitigation measures, creating significant

uncertainties in the U.S.

We continue to evaluate the effects of the COVID-19 pandemic on our business, and while our operations

were not materially affected during the year ended December 31, 2021 despite social distancing and other measures taken in response to

the pandemic, the ultimate impact of the COVID-19 pandemic on our results of operations and financial condition is dependent on future

developments, including the duration of the pandemic and the related extent of its severity, the pace and rate at which vaccines are administered,

and the continued emergence of new strains of COVID-19, such as the Delta and Omicron variants, as well as its impact on macroeconomic

conditions, which are uncertain and cannot be predicted at this time.

If the global response to contain the COVID-19 pandemic escalates

further or is unsuccessful, or if governmental decisions to ease pandemic related restrictions are ineffective, premature or counterproductive,

we could experience a material adverse effect on our business, financial condition, results of operations and cash flows.

RESULTS OF OPERATIONS

Comparison of Quarter Ended September 30,

2021 and 2020

Comparison of Quarter Ended March 31, 2022

The comparison of our historical results of operations

for the fiscal quarter ended September 30, 2021 to the fiscal quarter ended September 30, 2020 is as follows:

for the fiscal quarter ended March 31, 2022 to the fiscal quarter ended March 31, 2021 is as follows:

Quarter Ended

September 30, 2021

March 31, 2022

Quarter Ended

September 30, 2020

March 31, 2021

Royalty revenue

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General and administrative

Asset impairment charges

Total operating costs and expenses

(10,620,338 )

Loss from operations

(10,504,404 )

Other income (expense):

Other income (expense)

Interest income, net

Loss before income taxes

(10,478,888 )

Income tax benefit

$ (1,350,876 )

Other income:

Interest income

$ (1,593,611 )

$ (1,345,945 )

Revenue for the three months ended September 30,

2021 increased by $0.2 million, or 201.3%, to $0.3 million from approximately $0.1 million for the three months ended September 30, 2020.

This increase represents an increase in royalty revenue related to our sublicense agreement with Takeda Pharmaceuticals Co.

to the same period in 2020, as the sublicensee continued its worldwide launch of the product.

Revenue for the three months ended March 31, 2022

increased by $0.2 million, or 103.4%, to $0.4 million from approximately $0.2 million for the three months ended March 31, 2021.

increase represents an increase in royalty revenue related to our sublicense agreement with Takeda Pharmaceuticals Co.

as compared to the same period in 2021 as Takeda’s sublicensee continued its worldwide launch of the product.

Research and Development Expenses

Research & development (“R&D”)

expenses for the three months ended September 30, 2021 increased by $0.2 million, or 36.1% to $0.8 million from $0.6 million in the comparable

quarter in 2020.

The table below sets forth the R&D costs incurred by the Company by category of expense for the quarters ended September

30, 2021 and 2020:

expenses for the three months ended March 31, 2022 increased by $0.5 million, or 74.9%, to approximately $1.1 million from approximately

$0.6 million in the comparable quarter in 2021.

The table below sets forth the R&D costs incurred by the Company by category of expense

for the quarters ended March 31, 2022 and 2021:

Quarter Ended

Category of Expense

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

Outside services and contract research organizations

Salaries and wages

Personnel costs

Share-based expense

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services and contract research organizations expense was primarily due to increased spending related to our XCART platform technology

during the three months ended September 30, 2021 as compared to the same period in the prior year.

Costs related to our XCART program

were higher in 2021 as compared to the same period in 2020 as we continued to invest in our pre-clinical developments efforts.

This increase

was partially offset by a decrease in spending on our XBIO-101 Phase 2 clinical trial, which was closed during the first quarter of 2021.

during the three months ended March 31, 2022 as compared to the same period in the prior year.

Costs related to our XCART program were

significantly higher in 2022 as compared to the same period in 2021 as we continued to invest in our U.S.

pre-clinical developments efforts

to advance the technology.

The increase in other expense was due to consulting costs incurred during the first quarter of 2022 in connection

with the licensing of the DNase oncology platform from CLS.

General and Administrative Expenses

General and administrative expenses for the three

months ended September 30, 2021 was $0.9 million, increasing $0.1 million, or 17.5%, compared to the same period in the prior year.

increase was primarily due to increases in employee related, legal and consulting costs during the three months ended September 30, 2021

compared to the same period in 2020.

Asset Impairment Charges

Asset impairment charges were $9.2 million for

the three months ended September 30, 2020 as we recorded an asset impairment charge of $9.2 million related to our in-process research

and development (“IPR&D”).

There was no similar charge during the three months ended September 30, 2021.

Other Income (Expense)

Other expense was approximately $2,900 for the

three months ended September 30, 2021 as compared to other income of approximately $600 for the three months ended September 30, 2020.

This increase in expense relates to changes in foreign currency exchange rates during both periods.

Interest Income, net

months ended March 31, 2022 decreased by approximately $23,000, or 2.5%, to approximately $0.9 million from approximately $0.9 million

in the comparable quarter in 2021.

The decrease was primarily due to lower consulting costs offset by an increase in legal costs related

to the licensing of the DNase oncology platform from CLS during the three months ended March 31, 2022 compared to the same period in 2021.

Other income was approximately $200 for the three

months ended March 31, 2022 compared to approximately $900 of other income for the same period in 2021.

This decrease in other income

was primarily related to changes in foreign currency exchange rates during the three months ended March 31, 2022 as compared to the same

period in 2021.

Interest Income

Interest income increased to approximately $26,000

during the three months ended September 30, 2021 as compared to approximately $25,000 for the same period in the prior year.

This increase

is primarily due to an increase in cash during the third quarter of 2021 as a result of our July 2021 private placement.

Income Tax Benefit

Income tax benefit of $2.9 million for the three

months ended September 30, 2020 was due to the impairment of IPR&D during the third quarter of 2020.

There was no similar benefit

during the three months ended September 30, 2021.

Comparison of Nine Months Ended September

30, 2021 and 2020

The comparison of our historical results of operations for the nine

months ended September 30, 2021 to the nine months ended September 30, 2020 is as follows:

September 30,

Royalty revenue

Operating costs and expenses:

Research and development

General and administrative

Asset impairment charges

Total operating costs and expenses

(13,003,255 )

Loss from operations

(12,717,645 )

Other income (expense):

Other income (expense)

Interest income, net

Loss before income taxes

(12,611,959 )

Income tax benefit

$ (3,803,499 )

$ (9,693,441 )

$ (5,889,942 )

Revenue for the nine months ended September 30,

2021 increased by $0.5 million, or 189.9%, to $0.8 million from approximately $0.3 million for the nine months ended September 30, 2020.

This increase represents an increase in royalty revenue related to our sublicense agreement with Takeda Pharmaceuticals Co.

to the same period in 2020, as the sublicensee continued its worldwide launch of the product.

Research and Development Expenses

R&D expenses increased approximately $0.7

million, or 55.9% to $1.9 million for the nine months ended September 30, 2021, from $1.2 million for the nine months ended September

The table below sets forth the R&D costs incurred by us, by category of expense, for the nine months ended September 30,

2021 and 2020:

Nine Months Ended,

Category of Expense

September 30, 2021

September 30, 2020

Outside services and contract research organizations

Salaries and wages

Share-based expense

Total research and development expense

The increase in outside

services and contract research organizations expense was primarily due to increased spending related to our XCART platform technology

during the nine months ended September 30, 2021 as compared to the same period in the prior year.

Costs related to our XCART program were

higher in 2021 as compared to the same period in 2020 as we continued to invest in our pre-clinical developments efforts.

during the three months ended March 31, 2022 as compared to approximately $22,000 for the same period in the prior year.

This increase

was partially offset by a decrease in spending on our XBIO-101 Phase 2 clinical trial, which was closed during the first quarter of 2021.

Salaries and wages increased during the nine months ended September 30, 2021 due to slightly higher employee related costs.

General and Administrative Expenses

General and administrative expenses for the nine

months ended September 30, 2021 was $2.8 million, increasing $0.2 million, or 9.8%, compared to the same period in the prior year.

in employee related and consulting costs during the nine months ended September 30, 2021 compared to the same period in 2020 were substantially

offset by lower share-based expense and legal and accounting costs.

In addition, general and administrative expenses for the nine months

ended September 30, 2020 were lower than the same period in 2021 due to a $0.1 million gain on settlement of certain vendor amounts to

close out our XBIO-101 trial recognized during 2020.

Asset Impairment Charges

Asset impairment charges were $9.2 million for

the nine months ended September 30, 2020 as we recorded an asset impairment charge of $9.2 million related to our IPR&D.

no similar charge during the nine months ended September 30, 2021.

Other Income (Expense)

Other expense was approximately $1,800 for the

nine months ended September 30, 2021 compared to other income of approximately $650 for the same period in 2020.

This increase in expense

was primarily related to changes in foreign currency exchange rates during the nine months ended September 30, 2021 as compared to the

same period in 2020.

Interest Income, net

Interest income decreased to approximately $71,000

during the nine months ended September 30, 2021 as compared to approximately $105,000 for the same period in the prior year.

This decrease

is primarily due to a decrease in interest income on invested funds due to lower interest rates during 2021 compared to the same period

Income Tax Benefit

Income tax benefit of $2.9 million for the nine

months ended September 30, 2020 was due to the impairment of IPR&D during the third quarter of 2020.

There was no similar benefit

during the nine months ended September 30, 2021

is primarily due to a higher cash balance during the first quarter of 2022 compared to the same period in 2021.

Liquidity and Capital Resources

We incurred a net loss

of approximately $3.8 million for the nine months ended September 30, 2021.

of approximately $1.6 million for the three months ended March 31, 2022.

We had an accumulated deficit of approximately $184.1 million

at September 30, 2021 as compared to an accumulated deficit of approximately $176.9 million at December 31, 2020.

Working capital was

approximately $19.5 million at September 30, 2021 and $11.4 million at December 31, 2020, respectively.

During the nine months ended September

30, 2021, our working capital increased by $8.1 million primarily due to our $12.5 million private placement in July 2021 partially offset

by our net loss for the nine months ended September 30, 2021.

We expect to continue incurring losses for the foreseeable future and may

need to raise additional capital or pursue other strategic alternatives in the long-term in order to continue the pursuit of our business

at March 31, 2022, as compared to an accumulated deficit of approximately $182.5 million at December 31, 2021.

Working capital was approximately

$15.8 million at March 31, 2022, and $17.3 million at December 31, 2021, respectively.

During the three months ended March 31, 2022, our

working capital decreased by $1.5 million due to our net loss for the three months ended March 31, 2022.

We expect to continue incurring

losses for the foreseeable future and may need to raise additional capital or pursue other strategic alternatives in the long-term in

order to continue the pursuit of our business plan.

Our principal source

of liquidity consists of cash.

At September 30, 2021, we had approximately $19.7 million in cash and $1.1 million in current liabilities.

At March 31, 2022, we had approximately $16.2 million in cash and $1.1 million in current liabilities.

At December 31, 2021, we had approximately $18.2 million in cash and $1.4 million in current liabilities.

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

On December 4, 2020, we closed on a $6.0

million registered direct common stock offering resulting in $5.4 million of net proceeds to us.

On July 28, 2021, we completed a $12.5

million private placement of our common stock resulting in approximately $11.5 million of net proceeds to us.

We believe that these financings,

coupled with our existing resources, will be adequate for us to continue as a going concern.

However, we anticipate we may need additional

capital in the long-term to pursue our business initiatives.

The terms, timing and extent of any future financing will depend upon several

factors, including the achievement of progress in our clinical development programs, our ability to identify and enter into licensing

or other strategic arrangements, and factors related to financial, economic and market conditions, many of which are beyond our control.

We believe that our existing resources

will be adequate to fund our operations into the second quarter of 2023.

However, we anticipate we may need additional capital in the

long-term to pursue our business initiatives.

The terms, timing and extent of any future financing will depend upon several factors, including

the achievement of progress in our clinical development programs, our 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 our

The capital markets for the biotech industry can be highly volatile, which make the terms, timing and extent of any future financing

Cash Flows from Operating Activities

Cash flows used in operating activities for the

nine months ended September 30, 2021 totaled approximately $3.3 million, which was primarily due to our net loss for the period, partially

three months ended March 31, 2022 totaled approximately $2.1 million, which was primarily due to our net loss for the period, partially

offset by non-cash charges associated with share-based expense.

Cash flows used in operating activities for the nine months ended September

30, 2020 totaled approximately $3.3 million, which was primarily due to our net loss for the period, offset by non-cash charges associated

with asset impairment charges, deferred taxes, share-based expense, and settlement of certain amounts payable to a vendor related to the

close-out of our XBIO-101 trial.

In addition, prepaid expenses increased and current liabilities decreased

during the three months ended March 31, 2022.

Cash flows used in operating activities for the three months ended March 31, 2021 totaled

approximately $1.5 million, which was primarily due to our net loss for the period, offset by non-cash charges associated with share-based

Cash Flows from Investing Activities

There were no cash flows from investing activities

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

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

Cash Flow from Financing Activities

Cash flows from financing activities for the nine

months ended September 30, 2021 totaled approximately $11.5 million representing net proceeds from our private placement in July 2021.

There were no cash flows from financing activities for the nine months ended September 30, 2020.

There were no cash flows from financing activities

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

Contractual Obligations and Commitments

As of September 30, 2021, there were no material

changes in our contractual obligations and commitments from those disclosed in our Annual Report on Form 10-K for the year ended December

As of March 31, 2022, there were no material changes

in our contractual obligations and commitments from those disclosed in our 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.

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We do not have any off-balance sheet financing

arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial

arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, change in financial

condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

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the year ended December 31, 2021, filed with the SEC on March 22, 2022, as amended on April 28, 2022, for a discussion of recent accounting

Critical Accounting Policies and Estimates

Critical Accounting Estimates

Our condensed consolidated financial statements

are prepared in accordance with U.S.

The preparation of our condensed consolidated financial statements requires us to make estimates,

assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses.

We base our estimates

and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances.

We evaluate our estimates

and assumptions on an ongoing basis.

Our actual results may differ from these estimates.

There have been no material changes in our critical

accounting policies from those disclosed in our 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.

generally accepted accounting principles.

The preparation of our condensed consolidated financial

statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue,

costs and expenses.

We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable

under the circumstances.

We evaluate our estimates and assumptions on an ongoing basis.

The result of these evaluations forms the basis

for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent

from other sources.

Because future events and their effects cannot be determined with certainty, actual results and outcomes may differ

materially from our estimates, judgments and assumptions.

There have been no material changes in our critical accounting estimates from

those disclosed in our 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.

ITEM 3 – QUANTITATIVE AND QUALITATIVE

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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 2. Management’s Discussion and Analysis