What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-22 compared with 2022-03-22 · 167 added, 164 removed, 273 unchanged (55% of the section changed)

2 unchanged sentences

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.

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

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 (“PSA”)

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

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

Our DNase platform is designed to improve outcomes

of existing treatments, including immunotherapies, by targeting NETs.

We licensed the DNase oncology platform in April 2022 and expect

to prioritize our efforts and resources on the development of this newly acquired technology.

We are currently focused on advancing our

systemic DNase program into the clinic as an adjunctive therapy for pancreatic carcinoma and locally advanced or metastatic solid tumors.

We are also developing our 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, we have partnered with biotechnology and pharmaceutical companies to develop

our proprietary drug delivery platform, PolyXen, and receive royalty payments under an exclusive license arrangement in the field of blood

coagulation disorders.

We incorporate our patented and proprietary technologies

5 unchanged sentences

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 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 year ended December 31, 2021, was on advancing the development of our XCART platform technology.

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

by the Food and Drug Administration

(“FDA”) nor in any other countries or 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 efforts

during the year ended December 31, 2022, was on the licensing and advancement of our DNase platform and on the development of our XCART

platform technology.

Critical Accounting Policies and Estimates

97 unchanged sentences

pre-clinical development, clinical trial and related clinical manufacturing expenses, fees paid to contract research organizations (“CROs”)

and contract manufacturing organizations and other outside expenses.

We expense research and development costs as incurred.

upfront, non-refundable payments made for research and development services as obligations are incurred.

The value ascribed to intangible

assets acquired but which have not met capitalization criteria is expensed as research and development at the time of acquisition.

and contract manufacturing organizations (“CMOs") and other outside expenses.

We expense research and development costs as

We expense upfront, non-refundable payments made for research and development services as obligations are incurred.

ascribed to intangible assets acquired but which have not met capitalization criteria is expensed as research and development at the time

of acquisition.

Upfront payments under license agreements are expensed upon receipt of the license.

Milestone payments under license agreements

are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement

and the related amount is reasonably estimable.

We are required to estimate accrued research and

14 unchanged sentences

Program managers in connection with overall program management of clinical trials;

CMOs in connection with cGMP manufacturing;

CROs in connection with clinical trials;

2 unchanged sentences

pre-clinical activities and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts

with multiple research institutions and CROs that conduct and manage clinical trials on our behalf.

The financial terms of these agreements

are subject to negotiation, vary from contract to contract and may result in uneven payment flows.

There may be instances in which payments

made to vendors will exceed the level of services provided and result in a prepayment of the expense.

In accruing service fees, we estimate

the time period over which services will be performed and the level of effort to be expended in each period.

If the actual timing of the

performance of services or the level of effort varies from the estimate, we adjust the accrual or prepaid accordingly.

Although we do

not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services

performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high

or too low in any particular period.

To date, there have not been any material adjustments to our prior estimates of accrued research

and development expenses.

with multiple research institutions, CMOs and CROs that conduct and manage clinical trials on our behalf.

The financial terms of these

agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows.

There may be instances in

which payments made to vendors will exceed the level of services provided and result in a prepayment of the expense.

In accruing service

fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period.

actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or prepaid accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and

timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts

that are too high or too low in any particular period.

To date, there have not been any material adjustments to our prior estimates of

accrued research and development expenses.

Share-based Expense

53 unchanged sentences

combinations, licensing and other transactions are generally recognized at the date of acquisition at their respective fair values.

excess of the purchase price over the estimated fair values of the net assets acquired is recognized as goodwill.

At acquisition, we generally

determine the fair value of intangible assets, including in-process research and development (“IPR&D”), using the “income

method.” This method starts with a forecast of net cash flows, risk adjusted for estimated probabilities of technical and regulatory

success (for IPR&D) and adjusted to present value using an appropriate discount rate that reflects the risk associated with the cash

flow streams.

IPR&D intangible assets are considered indefinite-lived intangible assets until completion or abandonment of the associated

research and development efforts.

Subsequent to acquisition, indefinite lived intangibles

are not amortized but are reviewed for impairment at least annually as of October 1, or when events or changes in circumstances indicate

it is more likely than not that the carrying amount of such assets may not be recoverable.

Our annual assessment may consist of a qualitative

or quantitative analysis to determine if it is more likely than not that its fair value exceeds the carrying value.

When performing the

qualitative method, we determine whether the existence of events or circumstances leads us to determine that it is more likely than not

(that is, a likelihood of more than 50%) that indefinite lived intangibles are impaired.

If we choose to first assess qualitative factors

and it is determined that it is not more likely than not that intangible assets are impaired, then we are not required to take further

action to test for impairment.

We also have the option to bypass the qualitative assessment and perform only the quantitative impairment

test, which we may choose to do in some periods but not in others.

As the option to perform the qualitative assessment is not a permanent

election, we reassess this option during each annual impairment review.

An impairment loss, if any, is measured as the excess of the carrying

value of the intangible asset over its fair value.

When performing quantitative analysis, we use

the income and market valuation methods and may weigh outcomes of valuation approaches when estimating fair value.

Inputs and assumptions

used to determine fair value are determined from a market participant view, which might be different than our specific views.

The valuation

process is complex and requires significant input and judgment using internal and external sources.

Market approaches depend on the availability

of guideline companies and representative transactions.

When using the income approach, complex and judgmental matters applicable to the

valuation process may include estimated useful life, projections, tax rates and discount rates.

acquisition, we generally determine the fair value of intangible assets, including in-process research and development (“IPR&D”),

using the “income method.” Acquired IPR&D intangible assets are considered indefinite-lived intangible assets until completion

or abandonment of the associated research and development efforts.

Substantial additional research and development may be required before

the Company’s IPR&D reaches technological feasibility.

Upon completion of the IPR&D project, the IPR&D assets will be

amortized over their estimated useful lives.

Indefinite lived intangibles are not amortized

but are reviewed for impairment at least annually or when events or changes in the business environment indicate it is more likely than

not that the carrying value may be impaired.

Our annual assessment may consist of a qualitative or quantitative analysis to determine

if it is more likely than not that its fair value exceeds the carrying value.

When performing the qualitative method, we determine whether

the existence of events or circumstances leads us to determine that it is more likely than not (that is, a likelihood of more than 50%)

that indefinite lived intangibles are impaired.

If we choose to first assess qualitative factors and it is determined that it is not more

likely than not that intangible assets are impaired, then we are not required to take further action to test for impairment.

the option to bypass the qualitative assessment and perform only the quantitative impairment test, which we may choose to perform in some

periods but not in others.

As the option to perform the qualitative assessment is not a permanent election, we reassess this option during

each annual impairment review.

An impairment loss, if any, is measured as the excess of the carrying value of the intangible asset over

its fair value.

Intangible assets are highly vulnerable to impairment

15 unchanged sentences

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

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

uncertainties in the U.S.

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

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

no significant impact to our operations to date 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 and any subvariants, as well as its impact on macroeconomic

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

2 unchanged sentences

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

Impact of the Conflict in Ukraine on Our 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.

Results of Operations

1 unchanged sentence

historical results of operations for the year ended December 31, 2022 to the year ended December 31, 2021.

Increase (Decrease)

Percentage Change

Royalty revenue

2 unchanged sentences

General and administrative

Asset impairment charges

Total operating costs and expenses

(14,374,605 )

Loss from operations

(13,937,663 )

Other income (expense):

1 unchanged sentence

Interest income, net

Loss before income taxes

$ (6,552,353 )

Income tax benefit

$ (5,645,179 )

$ (10,893,466 )

$ (5,248,287 )

Revenue for the year ended December 31, 2022 increased

1 unchanged sentence

The increase represents

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

as compared to the same period

in 2020, as Takeda’s sublicensee continued its worldwide launch of the product.

an increase in royalty revenue related to our sublicense agreement with Takeda as compared to the same period in 2021.

Research and Development Expense

R&D expenses for the year ended December 31,

2021 increased by $1.4 million, or 82.7%, to $3.2 million from $1.7 million for the year ended December 31, 2020.

The table below sets

forth the research and development expenses incurred by category of expense for the year ended December 31, 2021, and 2020.

Overall, R&D expenses for the year ended December

31, 2022 increased by $1.6 million, or 50.8% to $4.8 million from $3.2 million in the comparable period in 2021 primarily due to IPR&D

expense of $1.8 million.

During the year ended December 31, 2022, the Company expensed $1.8 million of IPR&D associated with the Company’s

licensing of the DNase platform.

There was no similar expense in 2021 The table below sets forth the R&D costs incurred by us, by

category of expense, for the year ended December 31, 2022 and 2021:

Year ended December 31,

Category of Expense

IPR&D expense

Outside services and contract research organizations

Personnel costs

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 year ended December 31, 2021, as compared to the prior year.

Costs related to our XCART program were significantly higher in

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

Salaries and wages increased during the year ended December 31, 2021 due to higher employee related costs.

Excluding the $1.8 million

of IPR&D expense from total R&D expense of $4.8 million, R&D expenses decreased approximately $0.2 million, or 5.9% to $3.0

million for the year ended December 31, 2022, from $3.2 million for the year ended December 31, 2021.

The decrease in outside services

and contract research organizations expense was primarily due to decreased spending in connection with our XCART technology platform,

which was substantially offset by costs related to the licensing and our initial development efforts related to our DNase platform.

licensed the DNase platform in April 2022 and expect to direct our efforts and resources on the development of this newly acquired technology.

As a result, we have suspended development of our XCART technology platform.

General and Administrative Expense

General and administrative expenses for the year

ended December 31, 2021 was $3.7 million, increasing $0.3 million, or 10.1%, compared to the same period in the prior year.

in employee related, consulting and insurance costs during the year ended December 31, 2021, compared to the same period in 2020, were

partially offset by lower legal and share-based expense.

In addition, general and administrative expenses for the year ended December

31, 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 year ended December 31, 2020, as we recorded an asset impairment charge of $9.2 million related to our IPR&D.

There was no similar charge during the year ended December 31, 2021.

ended December 31, 2022 was $3.7 million, decreasing by approximately $0.1 million, or 2.4%, compared to the same period in the prior

The decrease was primarily due to a decrease in consulting and legal costs associated with our intellectual property portfolio substantially

offset by an increase in legal costs related to the licensing of the DNase oncology platform from CLS during the year ended December 31,

2022 compared to the same period in 2021.

Other Income (Expense)

Other income was approximately $1,100 for the

year ended December 31, 2021 compared to other expense of approximately $500 for the same period in 2020.

This increase in income was

primarily related to changes in foreign currency exchange rates during the year ended December 31, 2021, as compared to the same period

Other expense was approximately $1,600 for the

year ended December 31, 2022 compared to other income of approximately $1,100 for the same period in 2021.

This increase in other expense

was primarily related to unfavorable changes in foreign currency exchange rates during the year ended December 31, 2022 as compared to

the same period in 2021.

Interest Income, net

Interest income, net decreased to approximately

$100,000 during the year ended December 31, 2021, as compared to approximately $126,000 for the same period in the prior year.

This decrease

is primarily due to lower interest rate yields on invested funds during the year ended December 31, 2021 compared to the same period in

Income Tax Benefit

Income tax benefit of $2.9 million for the year

ended December 31, 2020 was due to the impairment of IPR&D during 2020.

There was no similar benefit during the year ended December

Interest income, net increased to approximately

$0.2 million during the year ended December 31, 2022 as compared to approximately $0.1 million for the same period in the prior year.

This increase is primarily due to an increase in interest income due to higher interest rates on invested funds during the year ended

December 31, 2022 compared to the same period in 2021.

This increase was partially offset by a decrease in interest income on the Pharmsynthez

Liquidity and Capital Resources

6 unchanged sentences

During the year ended December 31, 2022, our

working capital increased by $5.9 million due to our $12.5 million private placement in July 2021 partially offset by our net loss for

the year ended December 31, 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 plan.

working capital decreased by $4.7 million primarily due to our net loss for the year ended December 31, 2022 and cash of $0.5 million

used to obtain a license to the DNase oncology platform.

Our principal source

2 unchanged sentences

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

We have historically relied

upon sales of our equity securities to fund our operations.

We expect the majority of our funding through equity or equity-linked instruments,

debt financings, corporate collaborations, related party funding and/or licensing agreements to continue as a trend for the foreseeable

Management evaluates whether there are conditions

or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year

after the date that the financial statements are issued.

We have incurred substantial losses since our inception, and we expect to continue

to incur operating losses in the near-term.

These factors raise substantial doubt about our ability to continue as a going concern.

believe that we have access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations,

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

On 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 this financing, coupled with 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

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

financing uncertain.

We evaluate whether there

are conditions or events, considered in the aggregate that raise substantial doubt about our ability to continue as a going concern within

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

We have incurred substantial losses since our inception, and we expect

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

These factors raise substantial doubt about our ability to continue as a going

We believe that we have access to capital resources through possible public or private equity offerings, debt financings, corporate

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

We believe that our existing resources will be adequate

to fund our operations for a period of at least twelve months from the date of these financial statements.

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, our continued listing on the Nasdaq Stock Market (“Nasdaq”), and factors related

to financial, economic, geo-political, industry and market conditions, many of which are beyond our control.

The capital markets for the

biotech industry can be highly volatile, which make the terms, timing and extent of any future financing uncertain.

On June 3, 2022, we

received a written notification (the “Notice”) from the Listing Qualifications Department of Nasdaq notifying us that the

closing bid price for our common stock had been below $1.00 for 30 consecutive business days and that we therefore were 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 our common stock on the Nasdaq Capital Market.

Under the Nasdaq Listing Rules, we had a period of 180 calendar days from the date of the Notice to regain compliance with the Bid Price

Accordingly, we had until November 30, 2022 to regain compliance with the Bid Price Requirement and were eligible for an

additional 180 calendar day compliance period if certain other criteria were met.

On December 1, 2022, we received a letter from Nasdaq

informing us that although our common stock had not regained compliance with the minimum $1.00 bid price per share requirement, Nasdaq

had determined that we were eligible for an additional 180 calendar day period, or until May 29, 2023, to regain compliance.

determination was based on the Company meeting the continued listing requirement for market value of publicly held shares and all other

applicable requirements for initial listing on the Nasdaq Capital Market with the exception of the bid price requirement, and our written

notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.

On March 10, 2023, SVB was closed by the California Department of Financial

Protection and Innovation, which appointed the FDIC as receiver.

We maintained our cash primarily with SVB.

On March 12, 2023, the U.S.

Treasury, Federal Reserve and FDIC rolled out emergency measures to fully protect all depositors of SVB and, on March 13, 2023, we had

full access to our cash on deposit with SVB.

As a result, we do not anticipate any losses with respect to such balances.

Cash Flows from Operating Activities

1 unchanged sentence

year ended December 31, 2022 totaled approximately $4.6 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 year ended December 31, 2020

totaled approximately $4.3 million, which was primarily due to our net loss for the period, offset by non-cash charges associated with

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

the close-out of our XBIO-101 trial.

by non-cash charges associated with acquired IPR&D and share-based expense.

In addition, current liabilities decreased during the

year ended December 31, 2022.

Cash flows used in operating activities for the year ended December 31, 2021 totaled approximately $4.7

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 from Investing Activities

There were no cash flows from investing activities

for the years ended December 31, 2021 and 2020.

Cash flows used in investing activities for the

year ended December 31, 2022 totaled $500,000, which represented cash paid to license the DNase oncology platform.

There were no cash

flows from investing activities for the year ended December 31, 2021.

Cash Flow from Financing Activities

Cash flows from financing activities for the year

ended December 31, 2021 totaled approximately $11.5 million, representing net proceeds from our private placement in July 2021.

from financing activities for the year ended December 31, 2020 totaled approximately $5.4 million, representing net proceeds from our

registered direct common stock offering in December 2020.

There were no cash flows from financing activities

for the year ended December 31, 2022.

Cash flows from financing activities for the year ended December 31, 2021 totaled approximately

$11.5 million representing net proceeds from our private placement in July 2021.

Contractual Obligations

3 unchanged sentences

Our contractual obligations result from property leases for office space.

Although we do have obligations for CRO services,

the table below excludes potential payments we may be required to make under our agreements with CROs because timing of payments and actual

Although we do have obligations for CMO services,

the table below excludes potential payments we may be required to make under our agreements with CMOs because timing of payments and actual

amounts paid under those agreements may be different depending on the timing of receipt of goods or services or changes to agreed-upon

17 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis