We have described below a number of
uncertainties and risks which, in addition to uncertainties and risks presented elsewhere in this Quarterly Report, may adversely
affect our business, operating results and financial condition. The uncertainties and risks enumerated below as well as those presented
elsewhere in this Quarterly Report should be considered carefully in evaluating us, our business and the value of our securities.
The following important factors, among others, could cause our actual business, financial condition and future results to differ
materially from those contained in forward-looking statements made in this Quarterly Report or presented elsewhere by management
from time to time.
We have described below a number of
uncertainties and risks which, in addition to uncertainties and risks presented elsewhere in this Quarterly Report, may adversely
affect our business, operating results and financial condition. The uncertainties and risks enumerated below as well as those presented
elsewhere in this Quarterly Report should be considered carefully in evaluating us, our business and the value of our securities.
The following important factors, among others, could cause our actual business, financial condition and future results to differ
materially from those contained in forward-looking statements made in this Quarterly Report or presented elsewhere by management
from time to time.
Risks Related to our Financial Position
and Need to Raise Additional Capital
We were forced to curtail our operations
due to a lack of operating capital and we will not be able to continue as a going concern if we do not obtain additional financing.
Since our inception, we have funded our
operations through the sale of our securities. Our cash and restricted cash balances at June 30, 2019 was $229,000. In February
2018 we were forced to curtail our operations. Despite raising $500,000 in gross proceeds through the sale of convertible debentures
in July 2018 and $25,000 in December 2018 through the sale of notes, our ability to continue as a going concern is still wholly
dependent upon obtaining sufficient capital to fund our operations. We have no committed sources of additional capital and our
access to capital funding is always uncertain. Accordingly, despite our ability to secure capital in the past, we cannot assure
you that we will be able to secure additional capital through financing transactions, including issuance of debt, or through other
means such as the licensing of our technology or grants. In the event that we are not able to secure additional funding, we may
be forced to curtail operations, delay or stop ongoing clinical trials, cease operations altogether or file for bankruptcy.
Our auditors have expressed substantial
doubt about our ability to continue as a going concern.
Our auditors’ report on our December
31, 2018 financial statements expressed an opinion that our capital resources as of the date of their audit report were not sufficient
to sustain operations or complete our planned activities for the upcoming year unless we raised additional funds. Our current cash
level raises substantial doubt about our ability to continue as a going concern past the fourth quarter of 2019. If we do not obtain
additional funds by such time, we may no longer be able to continue as a going concern and will cease operation which means that
our shareholders will lose their entire investment.
Risks Relating to Our Stage of Development
and Business
If we are unable to successfully
build a new management team and secure additional members and employees, our business could be harmed.
On July 15, 2019, Christopher Lowe, our
chief executive officer, president and principal accounting officer resigned. In February 2018, Ronald Shazer, MD, resigned as
our chief medical officer. Effective July 26, 2019, we appointed Michael Cain as our interim Chief Executive Officer and Chief
Financial Officer. We will need to continue to augment senior management as well as additional personnel to execute our business
plan and grow our business. Our success depends largely on the development and execution of our business strategy by our senior
management team. The recent transitions in our executive team may be disruptive to our business, and if we are unable to manage
an orderly transition, our business may be adversely affected. Additionally, since our management team consists of only one individual,
Mr. Cain, the loss of Mr. Cain would likely harm our ability to implement our business strategy and respond to the rapidly changing
market conditions in which we operate. There may be a limited number of persons with the requisite skills to serve in these positions,
and we cannot assure you that we would be able to identify or employ such qualified personnel on acceptable terms, if at all. Additionally,
we cannot assure you that management will succeed in working together as a team. In the event that we are unsuccessful, our business
and prospects could be harmed.
We are an early-stage company, have
no product revenues, are not profitable and may never be profitable.
From inception through June 30, 2019, we
have raised approximately $36.9 million through the sale of our securities and exercise of outstanding warrants. During this same
period, we have recorded an accumulated deficit of approximately $61 million. Our net losses for the two most recent fiscal years
ended December 31, 2018 and 2017 were $12,000 and $11.1 million, respectively. Our decrease in net losses is a result of our curtailment
of operations beginning February 2018. None of our products in development have received approval from the United States Food and
Drug Administration or FDA, or other regulatory authorities; we have no sales and have never generated revenues nor do we expect
to for the foreseeable future. We have currently curtailed our pre-clinical and clinical trials related to mipsagargin and are
currently focusing our efforts on the development of our adenosine receptor modulators. We expect to incur significant operating
losses for the foreseeable future as we continue the research, pre-clinical and clinical development of our product candidates
as well as the possible in-licensing of additional clinical and pre-clinical assets. Accordingly, we will need additional capital
to fund our continuing operations and any expansion plans. Since we do not generate any revenue, the most likely sources of such
additional capital include the sale of our securities, a strategic licensing collaboration transaction or joint venture involving
the rights to one or more of our product candidates, or from grants. To the extent that we raise additional capital by issuing
equity securities, our stockholders are likely to experience dilution with regard to their percentage ownership of the company,
which may be significant. If we raise additional funds through collaborations or licensing arrangements, we may be required to
relinquish some or all the rights to our technologies, product candidates, or grant licenses on terms that are not favorable to
us. If we raise additional capital by incurring debt, we could incur significant interest expense and become subject to covenants
that could affect the manner in which we conduct our business, including securing such debt obligations with our assets.
Our product candidates are at various stages
of early development and significant financial resources are required to develop commercially viable products and obtain regulatory
approval to market and sell such products. We will need to devote significantly more research and development efforts, financial
resources and personnel to develop commercially viable products and obtain regulatory approvals. We may encounter hurdles and unexpected
issues as we proceed in the development of our other product candidates. While initial data from our research appear promising,
the outcome of the pre-clinical and development work is uncertain and future trials may ultimately be unsuccessful. If we fail
to develop and successfully commercialize our product candidates, our business may be materially harmed and could fail.
We have a limited operating history
as a company, and may not be able to effectively operate our business.
Our limited staff and operating history
means that there is a high degree of uncertainty regarding our ability to:
|
●
|
develop and commercialize our technologies and proposed products;
|
|
●
|
obtain regulatory approval to commence the marketing of our products;
|
|
●
|
identify, hire and retain the needed personnel to implement our business plan;
|
|
●
|
achieve market acceptance or insurance reimbursement for any of our proposed products, if successfully developed; or
|
|
●
|
respond to competition.
|
No assurances can be given as to exactly
when, if at all, we will be able to fully develop, and take the necessary steps to derive any revenues from our proposed product
candidates.
Raising capital may be difficult
as a result of our history of losses and limited operating history in our current stage of development.
When making investment decisions, investors
typically look at a company’s management, earnings and historical performance in evaluating the risks and operations of the
business and the business’s future prospects. Our history of losses, new senior management team and relatively limited operating
history in our current stage of development makes such evaluation, as well as any estimation of our future performance, substantially
more difficult. As a result, investors may be unwilling to invest in us or on terms or conditions which are acceptable. If we are
unable to secure additional financing, we may need to materially scale back our business plan and/or operations or cease operations
altogether.
Risks Related to Commercialization
The market for our proposed products
is rapidly changing and competitive.
The pharmaceutical and biotechnology industries
are subject to rapid and substantial technological change and innovation. Developments by others may render our proposed products
noncompetitive or obsolete, or we may be unable to keep pace with technological developments and other market factors. Competition
from pharmaceutical and biotechnology companies, universities, governmental entities and others diversifying into the field is
intense and is expected to increase.
As a pre-revenue company, our resources
are limited and we may experience challenges inherent in the early development of novel therapeutics. Competitors have developed
or are in the process of developing technologies that are, or in the future may be, the basis for competition. Some of these technologies
may have an entirely different approach or means of accomplishing similar therapeutic efforts compared to our proposed products.
Our competitors may develop therapies that are safer, more effective and less costly than our proposed products and therefore,
present a serious competitive threat to us.
The acceptance of therapies that are alternatives
to ours may limit market acceptance of our proposed products, even if commercialized. Many of our targeted diseases and conditions
can also be treated by other medications and treatments. These treatments may be widely accepted in medical communities and have
a longer history of use. The established use of other competing therapies may limit the potential for our proposed products, even
if commercialized.
Our proposed products may not be
accepted by the healthcare community.
Our proposed products, if approved for
marketing, may not achieve market acceptance by the healthcare community since hospitals, physicians, patients or the medical community
in general may decide not to utilize them. We are attempting to develop products that are likely to be first approved for marketing
as a treatment for late stage cancer where there is no truly effective standard of care. If approved for use in late stage cancer,
our proposed products might then be evaluated in earlier stages where they could represent a substantial departure from established
treatment methods and would most likely compete with a number of more conventional drugs and therapies which are manufactured and
marketed by major pharmaceutical companies. It is too early in the development cycle of our proposed products for us to predict
our major competitors. The degree of market acceptance of our products, if developed, will depend on a number of factors, including
but not limited to:
|
●
|
our ability to demonstrate the clinical efficacy and safety of our proposed products to the medical community;
|
|
●
|
our ability to create products that are superior to alternative products;
|
|
●
|
our ability to establish in the medical community the potential advantage of our treatments over alternative treatment methods; and
|
|
●
|
the reimbursement policies of government and third-party payors.
|
If the healthcare community does not accept
our products, our business could be materially harmed.
Our potential competitors in the
biotechnology and pharmaceutical industries have significantly greater resources than we have.
We compete against numerous companies,
many of which have substantially greater resources than we have. Several such competitors have research programs and/or efforts
to treat the same diseases we target. Companies such as Roche, Novartis, Celgene, Merck & Co., Inc., Johnson & Johnson,
and Sanofi S.A., as well as others, have substantially greater financial, research, manufacturing and marketing resources than
we do. As a result, such competitors may find it easier to compete in our industry and bring competing products to market.
Risks Related to the Development and Manufacturing of Our
Product Candidates
We intend to rely exclusively upon
third-party FDA-regulated manufacturers and suppliers for our proposed products.
We currently have no internal manufacturing
capability, and intend to rely exclusively on FDA-approved licensees, strategic partners or third party contract manufacturers
or suppliers for the foreseeable future. Because manufacturing facilities are subject to regulatory oversight and inspection, the
failure of any of our third-party FDA regulated manufactures or suppliers to comply with regulatory requirements could result in
material manufacturing delays and product shortages, which could delay or otherwise negatively impact our clinical trials and product
development plans. Should we be forced to manufacture our proposed products, we cannot give any assurance that we would be able
to develop internal manufacturing capabilities or secure third party suppliers for raw materials. In the event that we seek third
party suppliers or alternative manufacturers, they may require us to purchase a minimum amount of materials or could require other
unfavorable terms. Any such event could materially impact our business prospects and could delay the development of our proposed
products. Moreover, we cannot give any assurance that the contract manufacturers or suppliers that we select will be able to supply
our products in a timely or cost effective manner or in accordance with applicable regulatory requirements or our own specifications.
We may not be able to establish or
maintain the third-party relationships that are necessary to develop or potentially commercialize our product candidates.
As needed, we plan to rely heavily on third
party collaborators, partners, licensees, clinical research organizations, clinical investigators, vendors or other third parties
to support our research and development efforts and to conduct clinical trials for our product candidates. We cannot guarantee
that we will be able to successfully negotiate agreements for, or maintain relationships with, these third parties on a commercially
reasonable basis, if at all. Additionally, to commercialize our proposed products, we intend to rely on third party licensees or
the outright sale of our proposed products to pharmaceutical partner(s). If we fail to establish or maintain such third-party relationships
as anticipated, our business could be adversely effected.
We are dependent upon third parties
to develop our product candidates, and such parties are, to some extent, outside of our control.
We depend upon independent contract research
organizations, investigators and collaborators, such as universities and medical institutions, to conduct our pre-clinical and
clinical studies. These individuals and/or entities are not our employees and we cannot control the amount or timing of resources
that they devote to our programs. These third parties may not assign as great a priority to our programs or pursue them as diligently
as we would if we were undertaking such programs ourselves. If these third parties fail to devote sufficient time and resources
to our programs, or if their performance is substandard, the development of our drug candidates and corresponding FDA approval
could be delayed or fail entirely.
Our therapeutic compounds may not
be able to be manufactured profitably on a large enough scale to support commercialization.
To date, our therapeutic compounds have
only been manufactured at a scale which is adequate to supply our research activities and early-stage clinical trials. There can
be no assurance that the procedures currently used to manufacture our therapeutic compounds will work at a scale which is adequate
for commercial needs. In the event our therapeutic compounds cannot be manufactured in sufficient quantities for commercialization,
our future prospects could be significantly impacted and our financial prospects would be materially harmed.
Risks Relating to our Intellectual Property
Our competitive position is dependent
on our intellectual property and we may not be able to withstand challenges to our intellectual property rights.
We rely on our intellectual property, including
our issued and applied for U.S. and foreign patents as well as our licenses, as the foundation of our business. If our intellectual
property rights are challenged, no assurances can be given that our patents or licenses would survive claims alleging invalidity
or infringement on other patents and/or licenses. In addition, disputes may arise regarding inventorship of our intellectual property.
It is possible that our intellectual property may be infringing upon existing patents that we are not currently unaware of. As
the number of participants in the marketplace grows, the possibility of patent infringement claims against us increases. It is
difficult, if not impossible, to determine how such disputes would be resolved. Furthermore, because of the substantial amount
of discovery required in connection with patent litigation, there is a risk that some of our confidential information could be
required to be publicly disclosed. Any litigation claims against us may cause us to incur substantial costs and could place a significant
strain upon our financial resources, divert the attention of management or restrict our core business or result in the public disclosure
of confidential information.
We may incur substantial costs as
a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be unable to protect
our rights to, or use of, our technology.
Some or all of our patent applications
may not issue as patents, or the claims of any issued patents may not afford meaningful protection for our technologies or products.
In addition, patents issued to us or our licensors, if any, may be challenged and subsequently narrowed, invalidated or circumvented.
Patent litigation is widespread in the biotechnology industry and could harm our business. Litigation might be necessary to protect
our patent position or to determine the scope and validity of third-party proprietary rights. If we choose to go to court to stop
someone else from using the inventions claimed in our patents, that individual or company would have the right to ask the court
to rule that such patents are invalid and/or should not be enforced against that third party. These lawsuits are expensive and
we may not have the required resources to pursue such litigation or to protect our patent rights. In addition, there is a risk
that the court might decide that these patents are not valid and that we do not have the right to stop the other party from using
the inventions. There is also the risk that, even if the validity of these patents is upheld, the court could refuse to stop the
other party on the ground that such other party’s activities do not infringe on our rights contained in these patents.
Furthermore, a third party may claim that
we are using inventions covered by their patent rights and may go to court to stop us from engaging in our normal operations and
activities, including making or selling our product candidates. These lawsuits are costly and could materially increase our operating
expenses and divert the attention of managerial and technical personnel. There is a risk that a court would decide that we are
infringing the third party’s patents and would order us to stop the activities covered by the patents. In addition, there
is a risk that a court would order us to pay the other party damages for having violated the other party’s patents. The biotechnology
industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents
cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the
interpretation is not always uniform.
Because some patent applications in the
United States may be maintained in secrecy until the patents are issued, patent applications in the United States and many foreign
jurisdictions are typically not published until eighteen months after filing, and publications in the scientific literature often
lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our
issued patents or our pending applications or that we were the first to invent the technology. Our competitors may have filed,
and may in the future file, patent applications covering technology similar to ours. Any such patent application may have priority
over our patent applications and could further require us to obtain rights to issued patents covering such technologies.
If another party has filed a United States
patent application on inventions similar to ours, we may have to participate in an interference or other proceeding in the U.S.
Patent and Trademark Office, or the PTO, or a court to determine priority of invention in the United States. The costs of these
proceedings could be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our United
States patent position with respect to such inventions.
Some of our competitors may be able to
sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources.
In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect
on our ability to raise the capital necessary to continue our operations.
Obtaining and maintaining our patent
protection depends upon compliance with various procedural, documentary, fee payment and other requirements imposed by governmental
patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
The PTO and various foreign governmental
patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent
process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting
in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter
the market earlier than would otherwise have been the case.
We may not be able to adequately
protect our intellectual property.
We rely in part on trade secret protection
in order to protect our proprietary trade secrets and unpatented know-how. However, trade secrets are difficult to protect, and
we cannot be certain that others do not develop the same or similar technologies on their own. Additionally, research with regard
to our technologies has been performed in countries outside of the United States, and we also anticipate conducting joint ventures,
collaborations and future clinical trials outside the US. The laws in some of these countries may not provide protection for our
trade secrets and intellectual property. We have taken steps, including entering into confidentiality agreements with our employees,
consultants, service providers, and potential strategic partners to protect our trade secrets and unpatented know-how. These agreements
generally require that the other party keep confidential and not disclose to third parties all confidential information developed
by the party or made known to the party by us during the course of the party’s relationship with us. We also typically obtain
agreements from these parties which provide that inventions conceived by the party in the course of rendering services to us are
our property. However, these agreements may not be honored, including in foreign countries in which we conduct research, and may
not effectively assign intellectual property rights to us. Enforcing a claim that a party illegally obtained and is using our trade
secrets or know-how is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the
United States may be less willing to protect trade secrets or know-how. The failure to obtain or maintain trade secret protection
could adversely affect our competitive position.
We may be subject to claims that
our employees or consultants have wrongfully used or disclosed alleged trade secrets of their former employers.
As is common in the biotechnology and pharmaceutical
industries, we employ and hire individuals and/or entities who were previously employed at other biotechnology or pharmaceutical
companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject
to claims that these individuals, entities or that we have inadvertently or otherwise used or disclosed trade secrets or other
proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful
in defending against these claims, litigation could result in substantial costs and be a distraction to management.
Risks Relating to Marketing Approval
and Government Regulations
Data obtained from clinical trials
are susceptible to varying interpretations and may not be sufficient to support approval of our proposed products by the FDA.
The design of our potential clinical trials
will be based on many assumptions about the expected effect of our product candidates and if those assumptions are incorrect, our
potential clinical trials may not produce statistically significant results. Preliminary results may not be confirmed on full analysis
of the detailed results of early clinical trials. Data already obtained, or in the future obtained, from pre-clinical studies and
clinical trials do not necessarily predict the results that may be obtained from later trials. Moreover, pre-clinical and clinical
data are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. A number of companies
in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials, even after promising
results in earlier trials. The failure to adequately demonstrate the safety and effectiveness of a proposed formulation or product
under development could delay or prevent regulatory clearance of the potential drug. Our products may not prove to be safe and
effective in clinical trials and may not meet all regulatory requirements needed to receive regulatory approval. While data from
our completed trials appear promising, the outcome of the current trials is uncertain and these trials or future trials may ultimately
be unsuccessful. Our clinical trials may among other things, not demonstrate sufficient levels of safety and efficacy necessary
to obtain the requisite regulatory approvals for our drugs, and thus our proposed drugs may not be approved for marketing.
Our proposed products may not receive
FDA or other regulatory approvals.
The FDA and comparable government agencies
in foreign countries impose substantial regulations on the manufacture and marketing of pharmaceutical products through expensive,
lengthy and detailed laboratory, pre-clinical and clinical testing procedures, sampling activities and other costly and time-consuming
procedures. Satisfaction of these regulations typically takes several years or more and varies substantially based upon the type,
complexity and novelty of the proposed product. Our proposed products are subject to extensive regulation and/or acceptance by
numerous governmental authorities in the United States, including the FDA, and authorities in other countries. Most of our proposed
products will require governmental approval before they can be commercialized. Our failure to receive the regulatory approvals
in the United States or foreign countries will materially impact our business.
Our proposed products may not have
favorable results in clinical trials or receive regulatory approval.
Encouraging results from our studies to
date should not be relied upon as evidence that our planned pre-clinical and clinical trials will ultimately be successful or our
products approved for marketing. Even though the results of our studies to date seem promising, we will be required to demonstrate
through further pre-clinical and clinical trials that our product candidates are safe and effective for use in a diverse population
before we can seek regulatory approvals for their commercial sale. There is typically an extremely high rate of attrition from
the failure of product candidates as they proceed through clinical trials. If any product candidate fails to demonstrate sufficient
safety and efficacy in any clinical trial, then we could experience potentially significant delays in, or be required to abandon,
development of that product candidate. While initial data from our preliminary studies appear promising, the outcome of any clinical
trials is uncertain and such trials or future trials may ultimately be unsuccessful.
If users of our proposed products
are unable to obtain adequate reimbursement from third-party payors, market acceptance of our proposed products may be limited
and we may not achieve revenues or profits.
The continuing efforts of governments,
insurance companies, health maintenance organizations and other payers of healthcare costs to contain or reduce costs of health
care may affect our future revenues and profitability as well as the future revenues and profitability of our potential customers,
suppliers and collaborative partners in addition to the availability of capital. In other words, our ability to commercialize our
proposed products depends in large part on the extent to which appropriate reimbursement levels for the cost of our proposed formulations,
products and related treatments are obtained by the health care providers of these products and treatments. At this time, we cannot
predict the precise impact that recently adopted or future laws will have on these reimbursement levels.
We may be unable to comply with our
reporting and other requirements under federal securities laws.
The Sarbanes-Oxley Act of 2002, as well
as related new rules and regulations implemented by the United States Securities and Exchange Commission, or SEC, and the Public
Company Accounting Oversight Board, require changes in the corporate governance practices and financial reporting standards for
public companies. These laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002 relating
to internal control over financial reporting, would be expected to materially increase the Company’s legal and financial
compliance costs and make some activities more time-consuming and more burdensome. Presently we qualify as a non-accelerated filer.
Accordingly, we are exempt from the requirements of Section 404(b) and our independent registered public accounting firm is not
required to audit the design and operating effectiveness of our internal controls and management’s assessment of the design
and the operating effectiveness of such internal controls. In the event that we become an accelerated filer, we will be required
to expend substantial capital in connection with compliance.
We do not have effective internal
controls over our financial reporting.
Because of our limited resources, management
has concluded that our internal control over financial reporting may not be effective in providing reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.
generally accepted accounting principles. Effective internal controls over financial reporting and disclosure controls and procedures
are necessary for us to provide reliable financial and other reports and effectively prevent fraud. If we cannot provide reliable
financial or SEC reports or prevent fraud, investors may lose confidence in our SEC reports, our operating results and the trading
price of our common stock could suffer materially and we may become subject to litigation.
Compliance with changing regulation
of corporate governance and public disclosure may result in additional expenses and will divert time and attention away from revenue
generating activities.
Changing laws, regulations and standards
relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have
created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets
and public reporting. Our management team invests significant time and financial resources to comply with both existing and evolving
standards for public companies, which will lead to increased general and administrative expenses and a diversion of management
time and attention from developing our business to compliance activities which could have an adverse effect on our business.
Risks Relating to our Securities
Our common stock price may be particularly
volatile because of our stage of development and business.
The market prices for the securities of
biotechnology and pharmaceutical companies in general, and early-stage drug development companies in particular, such as ours,
have been highly volatile and may continue to be highly volatile in the future. The following may have a significant impact on
the market price of our common stock:
|
●
|
our ability retain and augment our current management team and workforce, which currently consists of only one employee, our chief executive officer;
|
|
●
|
the development status of our drug candidates, particularly the results of our clinical trials;
|
|
●
|
market conditions or trends related to the biotechnology and pharmaceutical industries, or the market in general;
|
|
●
|
announcements of technological innovations, new commercial products, or other material events by our competitors or us;
|
|
●
|
disputes or other developments concerning our proprietary rights;
|
|
●
|
changes in, or failure to meet, securities analysts’ or investors’ expectations of our financial and developmental performance;
|
|
●
|
additions or departures of key personnel;
|
|
●
|
loss of any strategic relationship;
|
|
●
|
discussions of our business, products, financial performance, prospects, or stock price by the financial and scientific press and online investor communities such as chat rooms;
|
|
●
|
industry developments, including, without limitation, changes in healthcare policies or practices or third-party reimbursement policies;
|
|
●
|
public concern as to, and legislative action with respect to, testing or other research areas of biopharmaceutical and pharmaceutical companies, the pricing and availability of prescription drugs, or the safety of drugs;
|
|
●
|
regulatory developments in the United States or foreign countries; and
|
|
●
|
economic, political and other external factors.
|
Broad market fluctuations may cause the
market price of our common stock to decline substantially. Additionally, fluctuations in the trading price or liquidity of our
common stock may materially and adversely affect, among other things, the interest of investors to purchase our common stock on
the open market and, generally, our ability to raise capital.
Our board of directors has broad
discretion to issue additional securities, in the event that we have adequate authorized capital to issue such securities.
We are authorized under our certificate
of incorporation to issue up to 150,000,000 shares of common stock and 30,000,000 “blank check” shares of preferred
stock. Shares of our blank check preferred stock provide the board of directors with broad authority to determine voting, dividend,
conversion, and other rights. As of August 1, 2019, we have issued and outstanding 150,000,000 shares of common stock and, accordingly,
no additional shares of common stock reserved for future grants under our equity compensation plans and for issuances upon the
exercise or conversion of currently outstanding shares of preferred stock, options, warrants and other convertible securities will
be available until such time as we complete a reverse stock split or authorize additional shares. As of August 1, 2019, we have
issued 1,853 shares of Series A 0% Convertible Preferred Stock, of which 133.8125 are outstanding, 1,000 shares of Series B 0%
Convertible Preferred Stock, of which 71 are outstanding, 290.43148 shares of Series C 0% Convertible Preferred Stock, that are
all outstanding, and 5,000 shares of Series D 0% Convertible Preferred Stock, all of which are outstanding. Accordingly, we are
entitled to issue no additional shares of common stock, and 29,994,505 additional shares of “blank check” preferred
stock. Our board may generally issue those common and preferred shares, or convertible securities to purchase those shares, without
further approval by our shareholders. Any additional preferred shares we may issue could have such rights, preferences, privileges,
and restrictions as may be designated from time-to-time by our board, including preferential dividend rights, voting rights, conversion
rights, redemption rights and liquidation provisions.
It is likely that we will issue a large
amount of additional securities to raise capital in order to further our business plans. It is also likely that we will issue a
large amount of additional securities to directors, officers, employees and consultants as compensatory grants in connection with
their services, both in the form of stand-alone grants or under our various stock plans. Any issuances could be made at a price
that reflects a discount to, or a premium from, the then-current market price of our common stock. These issuances would dilute
the percentage ownership interest of our current shareholders, which would have the effect of reducing your influence on matters
on which our stockholders vote, and might dilute the net tangible book value per share of our common stock.
We currently do not have enough authorized
shares of common stock for additional issuances. The shareholders have approved a reverse stock split in amount not less than 1-for-2
and not more than 1-for-500 at the discretion of the Board until December 31, 2019. The Board currently plans to effect a reverse
stock split in order to authorize additional capital for its future sale of securities stock issuances to service providers, warrant
exercises, and conversions of outstanding preferred stock and convertible debentures.
Future sales of our common stock
could cause our stock price to fall.
Transactions that result in a large amount
of newly issued shares become readily tradable, or other events that cause current stockholders to sell shares, could place downward
pressure on the trading price of our common stock. In addition, the lack of a robust trading market may require a stockholder who
desires to sell a large number of shares of common stock to sell the shares in increments over time to mitigate any adverse impact
of the sales on the market price of our stock. If our stockholders sell, or the market perceives that our stockholders intend to
sell for various reasons, substantial amounts of our common stock in the public market, including shares issued upon the exercise
of outstanding options or warrants, the market price of our common stock could fall. Sales of a substantial number of shares of
our common stock may make it more difficult for us to sell equity or equity-related securities in the future at a time and price
that we deem reasonable or appropriate. We may become involved in securities class action litigation that could divert management’s
attention and harm our business.
As of August 1, 2019, we had 150,000,000
shares of common stock, 1,853 shares of Series A 0% Convertible Preferred Stock issued and 133.8125 Series A 0% Convertible Preferred
Stock outstanding, 1,000 shares of Series B 0% Convertible Preferred Stock issued and 71 Series B 0% Convertible Preferred Stock
outstanding, 290.43148 shares of Series C 0% Convertible Preferred Stock issued and outstanding, and 5,000 shares of Series D 0%
Convertible Preferred Stock issued and outstanding. We additionally have issued an aggregate of $3,518,813 of senior convertible
debentures and convertible notes that are convertible into common stock at any time, of which $2,830,967 is outstanding. Substantially
all of the common shares and common shares underlying the Series A 0% Convertible Preferred, Series B 0% Convertible Preferred,
and Series C 0% Convertible shares are available for public sale, subject in some cases to volume and other limitations or delivery
of a prospectus. As of August 1, 2019, we were obligated to reserve for issuance (i) 328,221 shares of our common stock issuable
upon the conversion of 133.8125 shares of Series A 0% Convertible Preferred Stock including an additional number of common shares
we are contractually obligated to reserve pursuant to our December 2015 offering; (ii) 14,200,000 shares of our common stock issuable
upon the conversion of 71 shares of Series B 0% Convertible Preferred Stock including an additional number of common shares we
are contractually obligated to reserve pursuant to our December 2016 offering; (iii) 38,086,296 shares of our common stock issuable
upon the conversion of 290.43148 shares of Series C 0% Convertible Preferred Stock including an additional number of common shares
we are contractually obligated to reserve pursuant to our March 2017 offering, (iv) 1,000,000 shares of common stock issuable upon
the conversion of 5,000 shares of Series D 0% Convertible Preferred Stock, (v) 4,231,391 shares of our common stock issuable upon
exercise of outstanding warrants at a weighted average exercise price of $1.79 per share, including an additional number of common
shares we are contractually obligated to reserve pursuant to our December 2015 offering, December 2016 offering and March 2017
offering, (vi) 297,608 shares of our common stock issuable upon exercise of outstanding stock options under our equity compensation
plans at a weighted average exercise price of $5.00 per share and (vii) 878,244,110 shares of our common stock issuable upon conversion
of our outstanding convertible notes. Subject to applicable vesting requirements and holding periods, upon conversion or exercise
of the outstanding convertible notes, warrants and options, the underlying shares may be resold into the public market. Notwithstanding
the foregoing, none of the shares of common stock underlying these convertible securities may be converted or exercised given that
we have no shares of common stock available under our certificate of incorporation. We cannot predict if future issuances or sales
of our common stock, or the availability of our common stock for sale, would harm the market price of our common stock or our ability
to raise capital. Notwithstanding the foregoing, we currently do not have adequate authorized shares available for issuance pursuant
to our convertible securities as of August 1, 2019.
The market for our common stock has
been illiquid and our investors may be unable to sell their shares.
Our common stock trades with limited volume
on the pink sheets of the OTC Markets Group Inc. Accordingly, although a limited public market for our common stock exists, it
is still relatively illiquid compared to that of a seasoned issuer. Prior to making an investment in our securities, you should
consider the limited market for our common stock. No assurances can be given that the trading volume of our common stock will increase
or that a liquid public market for our securities will ever materialize.
We have not paid cash dividends in
the past and do not expect to pay cash dividends in the foreseeable future.
We have never paid cash dividends on our
common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. If we do not pay dividends,
our common stock may be less valuable because a return on your investment will only occur if the market price of our common stock
appreciates.
Provisions of Delaware law and executive
employment agreements may prevent or delay a change of control, which could depress the trading price of our common stock.
We are subject to the Delaware anti-takeover
laws regulating corporate takeovers. These anti-takeover laws prevent Delaware corporations from engaging in a merger or sale of
more than 10% of its assets with any stockholder, including all affiliates and associates of the stockholder, who owns 15% or more
of the corporation’s outstanding voting stock, for three years following the date that the stockholder acquired 15% or more
of the corporation’s assets unless:
|
●
|
the Board of Directors approved the transaction in which the stockholder acquired 15% or more of the corporation’s assets;
|
|
●
|
after the transaction in which the stockholder acquired 15% or more of the corporation’s assets, the stockholder owned at least 85% of the corporation’s outstanding voting stock, excluding shares owned by directors, officers and employee stock plans in which employee participants do not have the right to determine confidentially whether shares held under the plan will be tendered in a tender or exchange offer; or
|
|
●
|
on or after this date, the merger or sale is approved by the Board of Directors and the holders of at least two-thirds of the outstanding voting stock that is not owned by the stockholder.
|
A Delaware corporation may opt out of the
Delaware anti-takeover laws if its certificate of incorporation or bylaws so provides. We have not opted out of the provisions
of the anti-takeover laws. As such, these laws could prohibit or delay mergers or other takeover or change of control transactions
and may discourage attempts by other companies to acquire us.
In addition, employment agreements with
certain executive officers provide for the payment of severance and accelerated vesting of options and restricted stock in the
event of termination following a change of control. These provisions could have the effect of discouraging potential takeover attempts
even if it would be beneficial to shareholders.
Our certificate of incorporation
and bylaws contain provisions that could discourage a third-party from acquiring us.
Our certificate of incorporation and bylaws,
as applicable, among other things (i) provide our board with the ability to alter the bylaws without stockholder approval and (ii)
provide that vacancies on our board of directors may be filled by a majority of directors in office. These provisions, while designed
to reduce vulnerability to an unsolicited acquisition proposal, and to discourage certain tactics used in proxy fights, may negatively
impact a third-party’s decision to acquire us even if it would be beneficial to shareholders.
If securities or industry analysts
do not publish research or reports or if they publish unfavorable research or reports, an active market for our common stock may
not develop and the price of our common stock could decline.
We are a small company which is relatively
unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence
sales volume. Even if we come to the attention of such persons, they may be reluctant to follow or recommend an unproven company
such as ours until such time as we became more seasoned and viable. Generally, the trading market for a company’s securities
depends in part on the research and reports that securities or industry analysts publish. We currently have limited research coverage
by securities and industry analysts. As a consequence, there may be periods of time when trading activity in our shares is minimal
or non-existent, as compared to a seasoned issuer with significant research coverage. We cannot give you any assurance that a broader
or more active public trading market for our common stock will develop or if developed, will be sustained, or that current trading
levels could be sustained or not diminish. In addition, in the event any analysts downgrades our securities, the price of our shares
would likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest in
the purchase of our securities could decrease, which could cause the price of our common stock and its trading volume, if any,
to decline.
Our common stock may be considered
a “penny stock,” and may be subject to additional sale and trading regulations that may make it more difficult to sell.
Our common stock may be considered a “penny
stock.” The principal result or effect of being designated a penny stock is that securities broker-dealers participating
in sales of our common stock may be subject to the penny stock regulations set forth in Rules 15g-2 through 15g-9 promulgated under
the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a
document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least
two business days before effecting any transaction in a penny stock for the investor’s account. Moreover, Rule 15g-9 requires
broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny
stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or
her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as
to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement
setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy
of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment
experience and investment objectives. Compliance with these requirements may make it more difficult and time consuming for holders
of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.
We currently have no available common
stock available for new securities issuances, or for the conversion / exercise of outstanding securities, which may restrict us
from accessing additional capital through the sale of new securities or the exercise of outstanding convertible securities.
Our Certificate of Incorporation authorizes
us to issue up to 150,000,000 shares of common stock, all of which are issued and outstanding as of August 1, 2019. Accordingly,
we do not have sufficient authorized shares of common stock for additional issuances. While our shareholders have approved a reverse
stock split in amount not less than 1-for-2 and not more than 1-for-500 at the discretion of the Board until December 31, 2019,
no such additional reverse stock split has taken place. Notwithstanding, the Board currently plans to effect a reverse stock split
in order to authorize additional capital for its future stock issuances, warrant exercises, and conversions of outstanding preferred
stock and convertible debentures. Our failure to complete the reverse stock split may further subject us to penalties if we are
unable to satisfy conversions of our outstanding convertible debentures, or exercises of our outstanding warrants and options,
which may harm our financial position and business prospects.
If our management team is not effective
or if we fail to attract, hire or retain qualified personnel, we may not be able to design, develop or commercialize our products
successfully or manage our business.
While we have been able to secure a chief
executive officer, our anticipated growth and expansion may require the addition of new personnel and the development of additional
expertise by existing management. There is intense competition for qualified personnel in such areas. Accordingly, there can be
no assurances that we would be able to attract and retain the qualified personnel necessary for the successful development of our
business.