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Item 1. Financial Statements

2022-11-09 compared with 2022-08-11 · 282 added, 245 removed, 336 unchanged (61% of the section changed)

ITEM 1 – FINANCIAL

ITEM 1 – FINANCIAL STATEMENTS

XENETIC BIOSCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current assets:

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Series B, $ 0.001 par value:

1,804,394 shares issued and outstanding as of June 30, 2022 and December 31, 2021

1,804,394 shares issued and outstanding as of September 30, 2022 and December 31, 2021

Series A, $ 0.001 par value:

970,000 shares issued and outstanding as of June 30, 2022 and December 31, 2021

970,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021

Common stock, $ 0.001 par value;

50,000,000 shares authorized as of June 30, 2022 and December 31, 2021;

14,343,587 and 13,466,603 shares issued as of June 30, 2022 and December 31, 2021, respectively;

14,316,596 and 13,439,612 shares outstanding as of June 30, 2022 and December 31, 2021, respectively

50,000,000 shares authorized as of September 30, 2022 and December 31, 2021;

14,343,587 and 13,466,603 shares issued as of September 30, 2022 and December 31, 2021, respectively;

14,316,596 and 13,439,612 shares outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid in capital

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Total liabilities and stockholders' equity

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

XENETIC BIOSCIENCES, INC.

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THREE MONTHS ENDED

SIX MONTHS ENDED

SEPTEMBER 30,

NINE MONTHS ENDED

SEPTEMBER 30,

Royalty revenue

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( 1,934,432 )

( 1,154,279 )

General and administrative

1 unchanged sentence

( 2,766,397 )

( 1,821,282 )

Total operating costs and expenses

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( 3,872,741 )

( 2,496,742 )

Other income (expense):

Other income (expense)

Other expense

Interest income, net

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Basic and diluted net loss per share

Weighted-average shares of common stock

outstanding, basic and diluted

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

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

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

XENETIC BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'

THREE MONTHS ENDED JUNE 30, 2022

THREE MONTHS ENDED SEPTEMBER 30, 2022

Comprehensive

Stockholders'

Balance as of April 1, 2022

as of July 1, 2022

$ 207,012,317

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$ ( 5,281,180 )

Issuance of common stock in connection with purchase of in-process research

and development

Share-based expense

Exercise of purchase warrants

( 2,672,190 )

Balance as of June 30, 2022

of September 30, 2022

$ 207,149,681

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$ ( 5,281,180 )

SIX MONTHS ENDED JUNE 30, 2022

Preferred Stock

Number of Shares

Par Value ($0.001)

Number of Shares

Par Value ($0.001)

Paid in Capital

Accumulated Deficit

Comprehensive Income

Treasury Stock

Stockholders' Equity

NINE MONTHS ENDED SEPTEMBER 30, 2022

Comprehensive

Stockholders'

Balance as of January

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$ ( 5,281,180 )

Issuance of common stock in connection with purchase of in-process research and development

Issuance of common stock in connection

with purchase of in-process research and development

Share-based expense

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( 5,069,818 )

as of June 30, 2022

of September 30, 2022

$ 207,149,681

1 unchanged sentence

$ ( 5,281,180 )

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

XENETIC BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'

THREE MONTHS ENDED JUNE 30, 2021

Value ($0.001)

Comprehensive

Stockholders'

Balance as of April 1, 2021

THREE MONTHS ENDED SEPTEMBER 30, 2021

Paid in Capital

Comprehensive Income

Stockholders' Equity

Balance as of July 1,

$ 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

Balance as of June 30, 2021

( 1,350,876 )

SIX MONTHS ENDED JUNE 30, 2021

Value ($0.001)

Comprehensive

Stockholders'

( 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

Balance as of January

$ 194,133,511

Share-based expense

$ ( 176,902,086 )

$ ( 5,281,180 )

Issuance of common stock and warrants,

net of issuance costs

Exercise of pre-funded warrants

Exercise of purchase warrants

Balance as of June 30, 2021

Issuance of common stock to vendor

Share-based expense

( 3,803,499 )

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

( 3,803,499 )

of September 30, 2021

$ 205,880,753

$ ( 180,705,585 )

$ ( 5,281,180 )

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

XENETIC BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Changes in operating assets and liabilities:

Prepaid expenses and other assets

Prepaid expenses and other

Other long-term assets

Accounts payable, accrued expenses and other liabilities

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Net cash used in investing activities

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

( 4,395,858 )

( 2,245,998 )

Cash at beginning of period

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Issuance of common stock to acquire in-process research and development

Issuance of common stock to vendor

Issuance of common stock from cashless exercise of purchase warrants

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

XENETIC BIOSCIENCES, INC.

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Xenetic Biosciences, Inc.

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

(“Xenetic” or

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

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

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platform is designed to improve outcomes of existing treatments, including immunotherapies, by targeting neutrophil extracellular traps

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 lymphomas.

On April 26, 2022, the Company entered into exclusive license and sublicense

agreements with CLS Therapeutics Ltd.

(“CLS”) to develop its interventional DNase based oncology platform as more fully described

Additionally, Xenetic has partnered with biotechnology and pharmaceutical companies to develop its proprietary drug delivery

platform, PolyXen ® , and receives royalty payments under an exclusive license arrangement in the field of blood coagulation

As used in this Quarterly Report on Form 10-Q

(“Quarterly Report”), unless otherwise indicated, all references herein to “Xenetic,” the “Company,”

“we” or “us” refer to Xenetic Biosciences, Inc.

Xenetic is currently focused on advancing its systemic DNase program into the clinic as an adjunctive therapy for

pancreatic carcinoma and locally advanced or metastatic solid tumors.

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 lymphomas.

Additionally, Xenetic

has partnered with biotechnology and pharmaceutical companies to develop its proprietary drug delivery platform, PolyXen ® ,

and 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 (“Quarterly

Report”), unless otherwise indicated, all references herein to “Xenetic,” the “Company,” “we”

or “us” refer to Xenetic Biosciences, Inc.

and its wholly owned subsidiaries.

The Company, directly or indirectly, through its

wholly-owned subsidiaries, Hesperix S.A.

(“Hesperix”) and Xenetic Biosciences (U.K.) Limited (“Xenetic UK”), and

the wholly-owned subsidiaries of Xenetic UK, Lipoxen Technologies Limited (“Lipoxen”), Xenetic Bioscience, Incorporated and

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.

The Company, directly or indirectly, through its wholly-owned

subsidiaries, Hesperix S.A.

(“Hesperix”) and Xenetic Biosciences (U.K.) Limited (“Xenetic UK”), and the wholly-owned

subsidiaries of Xenetic UK, Lipoxen Technologies Limited (“Lipoxen”), Xenetic Bioscience, Incorporated and 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.

Going Concern and Management’s Plan

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The Company believes that

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

its existing resources will be adequate to fund the Company’s operations into the first quarter of 2024.

However, the Company anticipates

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of the Notice to regain compliance with the Bid Price Requirement.

Accordingly, the Company has until November 30, 2022 (the "Compliance

Date"), to regain compliance with the Bid Price Requirement and may be eligible for an additional 180 calendar day compliance period

if certain other criteria are met.

Impact of COVID-19

During March 2020, a

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

Accordingly, the Company has until November 30, 2022 to regain compliance

with the Bid Price Requirement and may be eligible for an additional 180 calendar day compliance period if certain other criteria are

and Uncertainties

Effects of the COVID-19

During March 2020, a global

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

has 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 reacted to the public health crisis with mitigation measures, creating significant

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to continue for some time.

Impact of the

conflict in Ukraine on Operations

The short and long-term

implications of Russia’s invasion of Ukraine are difficult to predict at this time.

The imposition of sanctions and counter sanctions

may have an adverse effect on the economic markets generally and could impact our business, financial condition, and results of operations.

Summary of Significant Accounting Policies

Preparation of Interim Financial Statements

The accompanying condensed consolidated interim

financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”)

The accompanying condensed consolidated interim financial

statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”)

and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim

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Principles of Consolidation

The condensed consolidated financial statements

of the Company include the accounts of Hesperix, Xenetic UK and Xenetic UK’s wholly owned subsidiaries:

The condensed consolidated financial statements of

the Company include the accounts of Hesperix, Xenetic UK and Xenetic UK’s wholly owned subsidiaries:

Lipoxen, Xenetic Bioscience,

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Basic and Diluted Net Loss per Share

The Company computes basic net loss per share

by dividing net loss applicable to common stockholders by the weighted-average number of shares of the Company’s common stock outstanding

during the period.

The Company computes diluted net loss per share after giving consideration to the dilutive effect of stock options

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

For the three and six months ended June 30, 2022

The Company computes basic net loss per share by dividing

net loss applicable to common stockholders by the weighted-average number of shares of the Company’s common stock outstanding during

The Company computes diluted net loss per share after giving consideration to the dilutive effect of stock options 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,

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.

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.

Recent Accounting Standards

In June 2016, the Financial Accounting Standards

Board issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):

of Credit Losses on Financial Instruments .

The guidance modifies the measurement and recognition of credit losses for most financial

assets and certain other instruments.

The amendment updates the guidance for measuring and recording credit losses on financial assets

measured at amortized cost by replacing the “incurred loss” model with an “expected loss” model.

This may result

in earlier recognition of allowance for losses.

ASU 2016-13 is effective for smaller reporting public entities for fiscal years beginning

after December 15, 2022 but early adoption is permitted.

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

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

In June 2016, the Financial Accounting Standards Board

issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit

Losses on Financial Instruments .

The guidance modifies the measurement and recognition of credit losses for most financial assets

and certain other instruments.

The amendment updates the guidance for measuring and recording credit losses on financial assets measured

at amortized cost by replacing the “incurred loss” model with an “expected loss” model.

This may result in earlier

recognition of allowance for losses.

ASU 2016-13 is effective for smaller reporting public entities for fiscal years beginning after December

15, 2022 but early adoption is permitted.

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

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

Significant Strategic Collaborations

The Company has entered into various research,

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

The Company has entered into various research, 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’s collaborative partners continue

to engage in research and development activities with no resultant commercial products through June 30, 2022.

to engage in research and development activities with no resultant commercial products through September 30, 2022.

No amounts were recognized

as revenue related to the Serum Institute, Pharmsynthez or SynBio agreements during the three and six months ended June 30, 2022 and 2021,

respectively.

In October 2017, the Company granted to Takeda

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 $ 0.8 million were recorded as revenue by the Company during the

three and six months ended June 30, 2022, respectively, and approximately $ 0.3 million and $ 0.5 million were recorded as revenue by the

Company during the three and six months ended June 30, 2021, respectively.

as revenue related to the Serum Institute, Pharmsynthez or SynBio agreements during the three and nine months ended September 30, 2022

and 2021, respectively.

In October 2017, the Company granted to Takeda Pharmaceuticals

(“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

Royalty payments of approximately $ 0.4 million and $ 1.2 million were recorded as revenue by the Company during the three and

nine months ended September 30, 2022, respectively, and 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.

These payments are based on single digit royalties on net sales

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As a result, Scripps Research agreed to continue to perform work under

the agreement until funding previously advanced is expended.

the agreement until funding previously advanced was expended.

The Company paid $ 2.4 million to Scripps Research under this agreement through

June 30, 2022.

As of 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.

There were no amounts recognized as an advance payment under this agreement

or accrued as of June 30, 2022.

September 30, 2022.

There were no amounts recognized as an advance payment under this agreement or accrued as of September 30, 2022.

of 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.

On June 30, 2022, the Company entered into a Statement

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SOW also contains customary provisions related to, among other things, confidentiality, warranties, intellectual property and indemnification.

No payments were made or costs incurred during the three and six months ended June 30, 2022.

During the three and nine months ended September 30, 2022, the Company paid Catalent $ 0.3 million , which has been recorded as a long-term

prepayment as of September 30, 2022.

Licensing Arrangements

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.

On April 26, 2022, the Company entered into an Exclusive

Sublicense Agreement (the “Sublicense Agreement”) with CLS Therapeutics Ltd.

(“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

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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.

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

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consideration received by the Company from any sublicensees.

The total consideration for the Sublicense

and License Agreements was approximately $ 1.3

million, which consists of a $ 0.5

million cash payment and the fair value of the 875,000

common shares issued of $ 0.8

million utilizing the closing market price of the Company’s stock price at the closing date.

The total consideration for the Sublicense and License

Agreements was approximately $ 1.3 million , which consists of a $ 0.5 million cash payment and the fair value of the 875,000 common shares

issued of $ 0.8 million utilizing the closing market price of the Company’s stock price at the closing date.

As there was no future

alternative use for the sublicense and license, the Company recorded an expense of $ 1.3

million to research and development expense for the three months ended June 30, 2022.

In addition, the Company incurred approximately

million and $ 0.2

million related to consulting and transaction costs in connection with the Sublicense and License Agreements in the three and six

months ended June 30, 2022, respectively.

alternative use for the sublicense and license, the Company recorded an expense of $ 1.3 million to research and development expense for

the nine months ended September 30, 2022.

In addition, the Company incurred approximately $ 0.2 million and $ 0.4 million related to consulting,

transaction and development costs in connection with the Sublicense and License Agreements in the three and nine months ended September

30, 2022, respectively.

Patent Assignment and Volition Collaboration

On October 4, 2022, the Company completed a patent

assignment related to its collaboration with Belgian Volition SARL Limited (“Volition”) and CLS.

In connection with the patent

assignment, the Company entered into a Subscription Agreement with CLS Therapeutics, LLC, a Delaware limited liability company (“CLS

LLC ”) on October 12, 2022, pursuant to which the Company agreed to issue to CLS LLC, and CLS LLC agreed to subscribe for, 850,000

shares of the Company’s common stock (the “Shares”) as consideration for the assignment by CLS and its affiliates to

the Company of certain patent rights owned by CLS and its affiliates.

The Shares were issued on October 12, 2022.

2022, the Company announced a research and development collaboration with Volition to develop NETs-targeted adoptive cell therapies

for the treatment of cancer.

The collaboration is an early exploratory program to evaluate the potential combination of Volition’s

Nu.Q® technology Test and the Company’s DNase-Armored CAR T platform to develop proprietary adoptive cell therapies potentially

targeting multiple types of solid cancers.

Under the terms of the collaboration agreement, Volition will fund a research program and the

two parties will share proceeds from commercialization or licensing of any products arising from the collaboration.

Fair Value Measurements

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at the measurement date.

As of June 30, 2022 and December 31, 2021, the carrying amounts of the Company’s financial instruments

As of September 30, 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 and six months ended June 30, 2022 and 2021.

during the three and nine months ended September 30, 2022 and 2021.

Stockholders’ Equity

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common stock and expire on February 23, 2025 .

No Series A Warrants were exercised or forfeited during the three and six months ended June

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 June 30, 2022 and December

No Series A Warrants were exercised or forfeited during the three and nine months ended

September 30, 2022.

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 September 30, 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 June 30, 2022 and December 31, 2021, respectively.

These warrants have

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

21,000 and 23,000 shares of common stock were outstanding as of September 30, 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.”

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for one share of common stock.

Warrants to purchase approximately 1,984 shares and 1,485 shares of common stock were exercised on a cashless,

one-for-one basis during the six months ended June 30, 2022 and 2021, respectively.

Warrants to purchase approximately 300 shares of common

stock were exercised on a cashless, one-for-one basis during the three months ended June 30, 2022.

No warrants were exercised during the

three months ended June 30, 2021.

None of these warrants were forfeited during the three and six months ended June 30, 2022 and 2021.

Warrants to purchase approximately 8,000 shares

of the Company’s common stock were outstanding as of June 30, 2022 and December 31, 2021.

No warrants to purchase shares of common stock were exercised during the three months ended September 30,

Warrants to purchase approximately 2,547 shares of common stock were exercised on a cashless, one-for-one basis during the three

months ended September 30, 2021.

Warrants to purchase approximately 1,984 shares and 4,032 shares of common stock were exercised on a

cashless, one-for-one basis during the nine months ended September 30, 2022 and 2021, respectively.

None of these warrants were forfeited

during the three and nine months ended September 30, 2022 and 2021.

Warrants to purchase approximately 8,000 shares of

the Company’s common stock were outstanding as of September 30, 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 and six months ended

June 30, 2022 and 2021.

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

September 30, 2022 and 2021.

Share-Based Expense

Total share-based expense related to stock options, restricted stock units and common stock awards was approximately $ 0.1 million for each of the three months ended June 30, 2022 and 2021

and approximately $ 0.3 million and $ 0.2 million for the six months ended June 30, 2022 and 2021, respectively.

Total share-based expense related to stock options,

restricted stock units and common stock awards was approximately $ 0.1 million for each of the three months ended September 30, 2022 and

2021 and approximately $ 0.4 million and $ 0.3 million for the nine months ended September 30, 2022 and 2021, respectively.

Share-based compensation expense is classified in the condensed consolidated

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Schedule of Share-Based Compensation Expense

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development expenses

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Employee Stock Options

During the six months ended June 30, 2022, the

During the nine months ended September 30, 2022, the

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

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share was $ 0.99 .

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

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

30, 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 %.

During the six months ended June 30, 2021, the Company granted 200,000 stock

option awards to purchase shares of common stock.

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

stock options during each of the three months ended June 30, 2022 and 2021 and $ 0.3 million and $ 0.2 million during the six months ended

June 30, 2022 and 2021, respectively.

During the nine months ended September 30, 2021, the Company granted 200,000

stock option awards to purchase shares of common stock.

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

to employee stock options during each of the three months ended September 30, 2022 and 2021 and $ 0.4 million and $ 0.3 million during the

nine months ended September 30, 2022 and 2021, respectively.

Non-Employee Stock Options

The Company did no t grant any non-employee stock

options during the six months ended June 30, 2022 and 2021.

The Company did no t grant any non-employee stock options

during the nine months ended September 30, 2022 and 2021.

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

during the three and six months ended June 30, 2022 and 2021, respectively.

During the three and six months ended June 30,

during the three and nine months ended September 30, 2022 and 2021, respectively.

During the three and nine months ended September 30,

2022 and 2021, there was no provision for income taxes as the Company incurred losses during both periods.

5 unchanged sentences

The valuation allowance against deferred tax assets

was approximately $ 32.6 million and $ 31.4 million as of June 30, 2022 and December 31, 2021, respectively.

As of June 30, 2022 and December 31, 2021,

was approximately $ 32.8 million and $ 31.4 million as of September 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022 and December 31, 2021,

the Company did no t record any unrecognized tax positions.

Supplemental cash flow information and non-cash

activity related to the Company’s operating leases are as follows:

Supplemental cash flow information and non-cash activity

related to the Company’s operating leases are as follows:

Cash flow information regarding leases

September 30,

Operating cash flow information:

Cash paid for amounts included in the measurement of lease liabilities

Supplemental balance sheet information related

to the Company’s operating leases is as follows:

Supplemental balance sheet information related to

the Company’s operating leases is as follows:

Supplemental information related to operating leases

Balance Sheet Classification

June 30, 2022

June 30, 2021

September 30,

September 30, 2021

Right-of-use assets - ST

6 unchanged sentences

Related Party Transactions

The Company has entered into various research,

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.

The Company has entered into various research, 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

of 2019, the Company entered into a loan agreement with Pharmsynthez (the “Pharmsynthez Loan”), pursuant to which the Company

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 Pharmsynthez.

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

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

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 Pharmsynthez.

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

The Pharmsynthez Loan is guaranteed by all of the operating subsidiaries of Pharmsynthez, including SynBio and AS Kevelt (“Kevelt”),

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

The Company recognized approximately

of interest income related to this loan during the three months ended June 30, 2021 and approximately $ 9,000

of interest income related to this loan during the six months ended June 30, 2022 and 2021, respectively.

The Company did no t

recognize any interest income during the three months ended June 30, 2022 as Pharmsynthez informed the Company that it could not make

interest payments during the second quarter as a result of Russian sanctions imposed in response to sanctions from the U.S.

countries, as discussed below.

Effective January 23, 2021, the Company entered

into a First Amendment to Loan Agreement and Other Loan Documents with Pharmsynthez, Kevelt and SynBio (the “Pharmsynthez Loan Extension”)

$ 12,000 of interest income related to this loan during the three months ended September 30, 2021 and approximately $ 9,000 and $ 35,000

of interest income related to this loan during the nine months ended September 30, 2022 and 2021, respectively.

The Company did no t recognize

any interest income during the three months ended September 30, 2022 as Pharmsynthez informed the Company that it could not make interest

payments commencing in the second quarter as a result of Russian sanctions imposed in response to sanctions from the U.S.

and other countries,

as discussed below.

Effective January 23, 2021, the Company entered into

a First Amendment to Loan Agreement and Other Loan Documents with Pharmsynthez, Kevelt and SynBio (the “Pharmsynthez Loan Extension”)

to modify the repayment terms and maturity of the Pharmsynthez Loan to January 2022.

5 unchanged sentences

from August 2021 through January 2022.

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.

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

7 unchanged sentences

In February 2022, the Company received a request from Pharmsynthez to further extend the principal repayments and the maturity of the

While the Company is working with Pharmsynthez to extend the maturity date of the loan, the terms of such extension are under negotiation

and have not yet been finalized.

As a result of this request and the ongoing 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 June 30, 2022 and December 31, 2021.

The Company assessed the collectability of the loan and determined that the U.S.-based

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 repayment of the outstanding principal balance.

As of June 30, 2022 and December 31, 2021, approximately $ 0.4

Subsequent to quarter end, the Company

entered into a Third Amendment to Loan Agreement and Other Loan Documents with Pharmsynthez, Kevelt and SynBio dated October 31,

2022 (the “Third Pharmsynthez Loan Extension”) primarily to modify the repayment terms and maturity of the Pharmsynthez

Loan to May 31, 2023.

The terms of the Third Pharmsynthez Loan Extension require certain payments of principal, interest and fees at

the signing of the Third Pharmsynthez Loan Extension.

In addition, the Third Pharmsynthez Loan Extension requires the repayment of

the remaining principal amount, plus interest, in seven (7) monthly installments from November 30, 2022 through May 31, 2023 as well

as certain other terms and conditions.

All other terms of the Pharmsynthez Loan, as amended, remained in effect.

As the payments

required under the Third Pharmsynthez Loan Extension have not been received to date and as a result of the ongoing 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 September 30, 2022 and December 31, 2021.

assessed the collectability of the loan and determined that the U.S.-based 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 repayment of the outstanding

principal balance.

As of September 30, 2022 and December 31, 2021, approximately $ 0.4

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

9 unchanged sentences

The Company performed a review of events subsequent

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.

2, 2022, the Company announced a research and development collaboration with Belgian Volition SARL Limited to develop NETs-targeted

adoptive cell therapies for the treatment of cancer.

The collaboration is an early exploratory program to evaluate the potential combination

of Volition’s Nu.Q® NETs Test and the Company’s DNase-Armored CAR T platform to develop proprietary adoptive cell therapies

potentially targeting multiple types of solid cancers.

Under the terms of the collaboration agreement, Volition will fund a research program

and the two parties will share proceeds from commercialization or licensing of any products arising from the collaboration.

to the balance sheet date through the date the financial statements were issued and determined that other than described in Notes 5 and

11, there were no such events requiring recognition or disclosure in the financial statements.

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