Item 1A. Risk Factors
ITEM 1A – RISK FACTORS
There have been no material changes to the risk factors
previously 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 other than as set forth below.
Risks Related to Our Financial Condition and Capital
Requirements
We have never been profitable and may never
achieve or sustain profitability. If we are unable to generate sufficient revenue from our operations to pay expenses or we are unable
to obtain additional financing on commercially reasonable terms, our business, financial condition and results of operations may be materially
and adversely affected .
We are a clinical-stage biopharmaceutical company
with a limited operating history. Pharmaceutical product and technology development is a highly speculative undertaking and involves a
substantial degree of risk. To date, we have focused primarily on developing XCART and researching additional drug candidates. We have
no products approved for commercial sale and have generated only limited revenue to date. Due to capital constraints in 2021, we focused
solely on pre-clinical development efforts associated with our XCART technology. With the licensing of the DNase oncology platform from
CLS in April 2022, our primary focus will be on advancing that technology via partnering opportunities or through regulatory approval
and commercialization, and we will continue to incur significant research and development and other expenses related to our ongoing operations.
As a result, we have never been profitable and we may not achieve profitability in the foreseeable future, if at all. Our ability to generate
profits in the future will depend on a number of factors, including:
·
Funding the costs relating to the research and development, regulatory approval, commercialization and sale and marketing of our drug candidates and technologies;
·
Market acceptance of our drug candidates and technologies;
·
Costs of acquiring and developing new drug candidates and technologies;
·
Ability to bring our drug candidates to market;
·
General and administrative costs relating to our operations;
·
Increases in our research and development costs;
·
Charges related to purchases of technology or other assets;
·
Establishing, maintaining and protecting our intellectual property rights;
·
Attracting, hiring and retaining qualified personnel; and
·
Our ability to raise additional capital.
As of September 30, 2022, we had an accumulated deficit
of approximately $187.6 million. We expect to incur additional significant operating losses as we expand our research and development
activities and our commercialization, marketing and sales efforts. We may also encounter unforeseen expenses, difficulties, complications,
delays and other unknown factors that may adversely affect our business. In addition, because of the numerous risks and uncertainties
associated with pharmaceutical product development, including that our current drug candidates may not achieve the clinical endpoints
of applicable trials, we are unable to predict the timing or amount of increased expenses and if or when we will achieve or maintain profitability.
If we are unable to generate sufficient revenue from our operations to pay expenses or we are unable to obtain additional financing on
commercially reasonable terms, our business, financial condition and results of operations may be materially and adversely affected.
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Risks Related to the Discovery and Development
of our Pharmaceutical Products
Our business is substantially dependent on the
success of the DNase oncology platform.
Our business will substantially depend on the successful
clinical development, regulatory approval and commercialization of the DNase oncology platform. It will require substantial clinical development
and regulatory approval efforts before we are permitted to commence its commercialization, if ever. We have, and plan to continue to pursue
our clinical development strategy through academic and strategic collaborations. If we have difficulty maintaining, obtaining, or are
unable to obtain these collaborations and additional academic collaborations as planned, we may need to delay, limit or terminate any
ongoing or planned clinical development, which would have an adverse effect on our business. The clinical trials and manufacturing and
marketing of DNase and any other product candidates will be subject to extensive and rigorous review and regulation by numerous government
authorities in the U.S., the European Union and other jurisdictions where we intend to test and, if approved, market our product candidates.
Before obtaining regulatory approvals for the commercial sale of any product candidate, we must demonstrate through preclinical testing
and clinical trials that the product candidate is safe and effective for use in each target indication and potentially in specific patient
populations. This process can take many years and may include post-marketing studies and surveillance, which would require the expenditure
of substantial resources beyond the proceeds we have currently raised. Of the large number of drugs in development for approval in the
U.S. and the European Union, only a small percentage successfully complete the FDA or European Medicines Agency regulatory-approval processes,
as applicable, and are commercialized. Accordingly, even if we are able to obtain the requisite financing or identify an academic or strategic
collaboration partner to continue to fund our research, development and clinical programs, we cannot assure you that DNase or any of our
other product candidates will be successfully developed or commercialized.
Risks Related to Our Reliance on Third-Parties
We may seek to establish additional collaborations
and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization
plans.
Our drug candidate development programs and the potential
commercialization of our drug candidates will require substantial additional cash to fund expenses. For some of our drug candidates, we
may decide to collaborate with additional pharmaceutical and biotechnology companies for the development and potential commercialization
of those drug candidates.
We face significant competition in seeking appropriate
collaborators. Whether we reach a definitive agreement for any additional collaborations will depend, among other things, upon our assessment
of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s
evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by FDA
or similar regulatory authorities outside the U.S., the potential market for the subject drug candidate, the costs and complexities of
manufacturing and delivering such drug candidate to patients, the potential of competing drugs, the existence of uncertainty with respect
to our ownership of technology (which can exist if there is a challenge to such ownership without regard to the merits of the challenge)
and industry and market conditions generally. The collaborator may also consider alternative drug candidates or technologies for similar
indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for
our drug candidate. The terms of any additional collaborations or other arrangements that we may establish may not be favorable to us.
We may also be restricted under existing collaboration
agreements from entering into future agreements on certain terms with potential collaborators. Collaborations are complex and time-consuming
to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical
companies that have resulted in a reduced number of potential future collaborators.
We may not be able to negotiate additional collaborations
on a timely basis on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the drug candidate
for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay
its potential commercialization or reduce the scope of any sales or marketing activities or increase our expenditures and undertake development
or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization
activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms, or at all. If we
do not have sufficient funds, we may not be able to further develop our drug candidates or bring them to market and generate product revenue.
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Risks Related to Our Common Stock
Our failure to meet the continued listing requirements
of The Nasdaq Capital Market could result in a de-listing of our common stock. Failure to regain compliance with Nasdaq listing rules
could affect the market price of our Common Stock and liquidity and reduce our ability to raise capital.
Currently, our Common Stock trades on the Nasdaq Capital
Market. On June 3, 2022, the Company received a written notification (the “Notice”) from the Listing Qualifications Department
of the NASDAQ Stock Market LLC (“Nasdaq”) notifying the Company that the closing bid price for its common stock had been below
$1.00 for 30 consecutive business days and that the Company therefore is not in compliance with the minimum bid price requirement for
continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”). The Notice
has no immediate effect on the listing of the Company’s common stock on the Nasdaq Capital Market.
Under the Nasdaq Listing Rules, the Company has a
period of 180 calendar days from the date 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. To regain compliance,
the closing bid price of the Company's common stock must be at least $1.00 for a minimum of ten consecutive business days prior to the
Compliance Date. In the event the Company does not regain compliance by the Compliance Date, the Company may be eligible for an additional
180 calendar day compliance period. To qualify for this second compliance period, the Company will be required to meet the continued listing
requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception
of the Bid Price Requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance
period, by effecting a reverse stock split, if necessary.
The Company intends to monitor the closing bid price
of its common stock and may, if appropriate, consider available options to regain compliance with the Bid Price Requirement. However,
there can be no assurance that the Company will be able to regain compliance with the Bid Price Requirement, or will otherwise be in compliance
with other Nasdaq Listing Rules. If we fail to regain compliance with the Nasdaq Listing Rules, including the Bid Price Requirement, we
could be delisted and our stock would be considered a penny stock under regulations of the SEC, and would therefore be subject to rules
that impose additional sales practice requirements on broker-dealers who sell our securities. The additional burdens imposed upon broker-dealers
by these requirements could discourage broker-dealers from effecting transactions in our common stock, which could severely limit the
market liquidity of our common stock and stockholder’s ability to sell our securities in the secondary market. If our common
stock were to be delisted from the NASDAQ Capital Market, the liquidity of our common stock would be materially affected, which would
decrease the attractiveness of our common stock to investors and result in a decline in the market price of our common stock. Also, it
may be difficult for us to raise additional capital if we are not listed on a major exchange.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
None.
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 – MINE SAFETY DISCLOSURES
Not applicable.
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