Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2020 or ¨ TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number: 001-37937 XENETIC BIOSCIENCES, INC. (Exact name of registrant as specified in its charter) Nevada (State or other juris ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 2020 or ¨ TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number: 001-37937 XENETIC BIOSCIENCES, INC. (Exact name of registrant as specified in its charter) Nevada (State or other jurisdicti ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2020 or ¨ TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Securities registered pursuant to Section 12(b) of the Act: | Title of each class | Trading Symbol(s) | Name of each exchange on which | | --- | --- | --- | | | | registered | | Com ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 2019 TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number: 001-37937 XENETIC BIOSCIENCES, INC. (Exact name of registrant as specified in its charter) Nevada (State or other jurisdiction of incor ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2019 or ¨ TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number: 001-37937 XENETIC BIOSCIENCES, INC. (Exact name of registrant as specified in its charter) Nevada (State or other juris ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 2019 or ¨ TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number: 001-37937 XENETIC BIOSCIENCES, INC. (Exact name of registrant as specified in its charter) Nevada (State or other jurisdicti ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2019 ¨ TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number: 001-37937 XENETIC BIOSCIENCES, INC. (Exact name of registrant as specified in its charter) Nevada (State or other jurisdiction ...

Part I [Business Overview](index=6&type=section&id=Item%201%20Business) Xenetic Biosciences is a biopharmaceutical company focused on discovering, researching, and developing next-generation biologics and novel oncology therapies, leveraging over 170 US and global patents to generate operating capital through out-licensing and support clinical development of oncology candidates. [Overview](index=6&type=section&id=Overview) The company is a biopharmaceutical firm dedicated to the discovery, research, and development of next-generation biologics and novel oncology therapies. - The company holds over **170 US and global patents**, covering its PolyXen™ platform technology, advanced polymer conjugation techniques, and proprietary biologics and novel oncology drug candidates[17](index=17&type=chunk) - XBIO-101 (cridanimod sodium) is the company's most advanced oncology candidate, designated as an orphan drug by the US FDA for progesterone-resistant endometrial cancer[19](index=19&type=chunk) - In 2018, due to funding limitations, the company's internal development efforts primarily focused on XBIO-101[21](index=21&type=chunk) [Our Strategy](index=7&type=section&id=Our%20Strategy) The company plans to acquire the XCART platform, a novel CAR T technology, to develop patient and tumor-specific neoantigen cell therapies, initially for B-cell lymphoma. - The company's strategy involves developing oncology candidates through regulatory approval and commercialization, while opportunistically out-licensing its PolyXen platform technology to generate working capital[24](index=24&type=chunk) - The company plans to seek orphan drug designation and accelerated approval pathways for relevant oncology indications in the US and Europe[25](index=25&type=chunk) [Recent Developments](index=7&type=section&id=Recent%20Developments) The company signed an agreement on March 1, 2019, to acquire the XCART platform technology, a proximity-screening-based CAR T technology, with the transaction expected to close in the first half of 2019. - The XCART transaction, involving the issuance of **7.5 million shares of common stock**, is anticipated to close in the first half of 2019[30](index=30&type=chunk) - Patient enrollment for the Phase II clinical trial of XBIO-101 was halted in March 2019 due to challenges in patient recruitment and retention, leading to slower-than-expected progress[32](index=32&type=chunk) [Our Technology and Drug Candidates](index=8&type=section&id=Our%20Technology%20and%20Drug%20Candidates) The company's patent portfolio encompasses four core proprietary technologies: XBIO-101, PolyXen, OncoHist, and ImuXen. - XBIO-101 has received FDA orphan drug designation for progesterone receptor-negative endometrial cancer and may hold therapeutic potential in other hormone-refractory cancers[33](index=33&type=chunk)[40](index=40&type=chunk) - ErepoXen (polysialylated erythropoietin, PSA-EPO) utilizes PolyXen platform technology to treat chronic kidney disease anemia, aiming to extend drug half-life, but internal clinical development has been terminated, with out-licensing being pursued[43](index=43&type=chunk) - OncoHist, a therapeutic platform targeting apoptosis using modified human histone H1.3, was previously used for relapsed or refractory acute myeloid leukemia (AML) but is currently on hold due to funding limitations[36](index=36&type=chunk)[48](index=48&type=chunk) [Significant Co-Development Collaborations and Strategic Arrangements](index=12&type=section&id=Significant%20Co-Development%20Collaborations%20and%20Strategic%20Arrangements) The company has exclusive R&D and licensing agreements with Takeda (formerly Shire plc) for polysialylated blood coagulation factors using PolyXen technology, and with Baxalta for a sub-license agreement. - Takeda (formerly Shire plc) terminated further development of SHP656 (PSA-rFVIII) in May 2017 but initiated a new undisclosed project under an exclusive R&D and licensing agreement for polysialylated blood coagulation factors using PolyXen technology[55](index=55&type=chunk)[56](index=56&type=chunk) - The company entered a sub-license agreement with Baxalta (a Takeda subsidiary) in October 2017, receiving a **$7.5 million** one-time payment and eligibility for single-digit royalties on net sales of Covered Products[57](index=57&type=chunk) - An exclusive license for PolyXen and OncoHist platform technologies in Russia and CIS countries was granted to SynBio LLC, which became a wholly-owned subsidiary of Pharmsynthez in 2017, with the company gaining access to SynBio's clinical data[58](index=58&type=chunk)[63](index=63&type=chunk) - An exclusive R&D and licensing agreement with PJSC Pharmsynthez covers PolyXen and ImuXen technologies in Russia and CIS countries; Pharmsynthez is the company's controlling shareholder, holding approximately **57.1% of common stock** as of December 31, 2018[64](index=64&type=chunk)[67](index=67&type=chunk) - An R&D collaboration agreement with Serum Institute of India Limited grants an exclusive license to develop PSA-EPO using PolyXen technology; Serum Institute is an affiliate, holding approximately **6.7% of common stock** as of December 31, 2018[69](index=69&type=chunk)[72](index=72&type=chunk) [Our Intellectual Property](index=15&type=section&id=Our%20Intellectual%20Property) As of February 28, 2019, the company directly or indirectly owns over 170 US and international patents covering PolyXen platform technology, XBIO-101, and OncoHist. - The company's patent strategy involves filing applications in major pharmaceutical markets and drug manufacturing locations, including the US, UK, Australia, Japan, Canada, South Korea, China, India, Russia, and parts of the EU[76](index=76&type=chunk) - Existing granted patents are primarily set to expire between **2025 and 2030**[74](index=74&type=chunk) [Manufacturing and Supply](index=17&type=section&id=Manufacturing%20and%20Supply) The company lacks internal manufacturing capabilities and relies on third-party manufacturers, including Kevelt, Pharmsynthez, and Serum Institute, for drug candidate materials. - The company relies on third-party manufacturers (including Kevelt, Pharmsynthez, and Serum Institute) to produce drug candidate materials, as it does not possess internal manufacturing capabilities[87](index=87&type=chunk) [Government Regulation](index=18&type=section&id=Government%20Regulation) The company's product development is subject to extensive regulation by US federal, state, local, and other national authorities, covering all stages from R&D to marketing. - In the US, new drugs require FDA's NDA process, and new biologics require the BLA process for legal marketing[89](index=89&type=chunk) - The FDA offers orphan drug designation, providing incentives such as **seven years of market exclusivity** for drugs treating rare diseases[104](index=104&type=chunk) - The FDA also has programs like Fast Track, Priority Review, Accelerated Approval, and Breakthrough Therapy designation to expedite the development and review of new drugs and biologics meeting specific criteria[107](index=107&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) [Research and Development Expenses](index=25&type=section&id=Research%20and%20Development%20Expenses) Research and development expenses decreased from $4.1 million in 2017 to $2.9 million in 2018. R&D Expenses (2018 vs 2017) | Year | Amount (million dollars) | | :--- | :---: | | 2018 | 2.9 | | 2017 | 4.1 | [Employees](index=25&type=section&id=Employees) As of December 31, 2018, the company had four full-time employees and utilized experts and independent consultants in various specialized fields. - As of December 31, 2018, the company had **four full-time employees** and leveraged experts and independent consultants in regulatory affairs, pharmacovigilance, process engineering, manufacturing, quality assurance, and preclinical and clinical development[130](index=130&type=chunk)[132](index=132&type=chunk) [Competition](index=26&type=section&id=Competition) The pharmaceutical and biotechnology industries are highly competitive, with the company facing rivals from large pharmaceutical and biotech firms, academic institutions, and research organizations. - XBIO-101 in endometrial and triple-negative breast cancer faces competition from various existing and developing therapies, including radiation, surgery, chemotherapy, antibodies, antibody-drug conjugates, and immunotherapies[134](index=134&type=chunk)[135](index=135&type=chunk) - The PolyXen drug delivery platform competes with technologies such as PEGylation, Fc fusion, albumin fusion, HESylation, PASylation, sustained release, and CTP fusion[136](index=136&type=chunk) [Risk Factors](index=27&type=section&id=Item%201A%20Risk%20Factors) The company faces multiple risks, including poor financial condition, uncertainty regarding the XCART acquisition, high inherent risks in drug development, reliance on third-party collaborations, intellectual property protection challenges, and operational and common stock-related risks. - The company has never been profitable, with an accumulated deficit of approximately **$153.2 million** as of December 31, 2018, and consistently generates negative operating cash flows, raising substantial doubt about its ability to continue as a going concern[141](index=141&type=chunk)[142](index=142&type=chunk) - The company will require substantial additional funding to complete clinical trials, obtain regulatory approvals, and commercialize its drug candidates; failure to obtain timely funding on acceptable terms may force delays, limitations, or termination of product development[144](index=144&type=chunk)[147](index=147&type=chunk) - The XCART acquisition transaction carries uncertainties, including risks of not closing timely, failing to meet closing conditions, or not achieving anticipated benefits, and the company's business is highly dependent on XCART's successful development and commercialization[150](index=150&type=chunk)[151](index=151&type=chunk) - Drug development is a lengthy and high-risk process, where clinical trials may be delayed or fail due to patient recruitment difficulties, design flaws, safety concerns, or changes in regulatory requirements, thereby hindering product commercialization[155](index=155&type=chunk)[159](index=159&type=chunk)[164](index=164&type=chunk) - The company relies on third parties for clinical research, manufacturing, and distribution; poor performance by these third parties or conflicts in collaboration relationships could adversely affect the business[196](index=196&type=chunk)[201](index=201&type=chunk)[215](index=215&type=chunk) - Intellectual property protection faces challenges, including patents potentially being challenged, invalidated, or circumvented, difficulties in global protection, and risks of infringing third-party intellectual property[221](index=221&type=chunk)[227](index=227&type=chunk)[231](index=231&type=chunk) - The market price of the company's common stock may be highly volatile, and major shareholders and management hold significant stakes, exerting substantial influence over matters requiring shareholder approval[274](index=274&type=chunk)[275](index=275&type=chunk) [Unresolved Staff Comments](index=56&type=section&id=Item%201B%20Unresolved%20Staff%20Comments) This item is not applicable to the company. [Properties](index=56&type=section&id=Item%202%20Properties) The company leases approximately 1,700 square feet of office space in Framingham, Massachusetts, until September 2020, and 450 square feet in Miami, Florida, until November 2019, deeming existing space sufficient for current needs. - The company leases approximately **1,700 square feet** of office space in Framingham, Massachusetts, with a lease term extending to September 2020[283](index=283&type=chunk) - The company leases **450 square feet** of office space in Miami, Florida, with the lease term extended to November 30, 2019[284](index=284&type=chunk) [Legal Proceedings](index=56&type=section&id=Item%203%20Legal%20Proceedings) The company is occasionally involved in litigation and claims, but management believes these matters will not have a material adverse effect on the company's financial position, results of operations, or cash flows as of December 31, 2018. - As of December 31, 2018, management believes the legal proceedings faced by the company will not have a material adverse effect on its financial position, results of operations, or cash flows[286](index=286&type=chunk) - The company paid approximately **$0.6 million** in December 2017 to resolve litigation with former supplier Eurogentec S.A[521](index=521&type=chunk) [Mine Safety Disclosures](index=56&type=section&id=Item%204%20Mine%20Safety%20Disclosures) This item is not applicable to the company. Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=57&type=section&id=Item%205%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock is listed on the Nasdaq Capital Market under the symbol "XBIO," with 410 common stockholders as of March 15, 2019, and no cash dividends have ever been declared or paid, nor are they planned for the foreseeable future. - The company's common stock is listed on the Nasdaq Capital Market under the ticker symbol **“XBIO”**[290](index=290&type=chunk) - As of March 15, 2019, the company had **410 holders of common stock**[290](index=290&type=chunk) - The company has never declared or paid any cash dividends and does not intend to do so for the foreseeable future[291](index=291&type=chunk) - The company did not repurchase any of its issued securities in **2018 and 2017**[293](index=293&type=chunk) [Selected Financial Data](index=57&type=section&id=Item%206%20Selected%20Financial%20Data) The company, as a smaller reporting company, is not required to provide this information. [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=57&type=section&id=Item%207%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company continued to incur losses in 2018, with an accumulated deficit of $153.2 million and negative working capital, raising substantial doubt about its going concern ability, and plans to acquire XCART technology and seek additional financing to support future operations. [Business Overview](index=57&type=section&id=BUSINESS%20OVERVIEW) The Phase II clinical trial for XBIO-101 was halted in March 2019 due to patient recruitment and retention challenges, with internal development in 2018 primarily focused on XBIO-101 due to funding constraints. - Patient enrollment for the Phase II clinical trial of XBIO-101 was halted in March 2019 due to challenges in patient recruitment and retention[295](index=295&type=chunk) - In 2018, due to funding limitations, the company's internal development efforts primarily focused on XBIO-101 R&D[296](index=296&type=chunk) - The company signed an agreement on March 1, 2019, to acquire the XCART platform technology, aimed at developing CAR T-cell therapies for B-cell non-Hodgkin lymphoma, with the transaction expected to close in the first half of 2019[297](index=297&type=chunk) [Critical Accounting Estimates](index=58&type=section&id=Critical%20Accounting%20Estimates) The company adopted ASC 606, "Revenue from Contracts with Customers," on January 1, 2018, with no material impact due to the absence of revenue-generating customer contracts. - R&D expenses are recognized as incurred, including personnel costs, research supplies, and clinical and preclinical study costs[309](index=309&type=chunk) - Share-based compensation expenses (including options, RSUs, JSOPs, and common stock awards) are estimated at fair value using the Black-Scholes option pricing model and recognized on a straight-line basis over the vesting period[311](index=311&type=chunk)[312](index=312&type=chunk) - Goodwill and indefinite-lived intangible assets (IPR&D) are not amortized but tested for impairment annually (October 1) or when business conditions change, with no impairment recorded in 2018 and 2017[318](index=318&type=chunk)[321](index=321&type=chunk)[325](index=325&type=chunk) [Results of Operations](index=63&type=section&id=RESULTS%20OF%20OPERATIONS) In 2018, the company reported no revenue compared to $7.585 million in 2017, primarily from a sub-license payment, while both R&D and general & administrative expenses decreased. Comparison of Operating Results (2018 vs 2017) | Metric | 2018 (dollars) | 2017 (dollars) | Change (dollars) | Change (%) | | :--- | :---: | :---: | :---: | :---: | | License and Collaboration Service Revenue | 0 | 7,585,000 | (7,585,000) | (100.0)% | | Research and Development Expenses | (2,883,952) | (4,060,000) | (1,176,048) | (29.0)% | | General and Administrative Expenses | (4,392,375) | (6,937,643) | (2,545,268) | (36.7)% | | Operating Loss | (7,276,327) | (3,568,762) | 3,707,565 | 103.9% | | Net Loss | (7,300,458) | (3,595,132) | 3,705,326 | 103.1% | - **No revenue** was generated in 2018, whereas 2017 revenue primarily stemmed from a **$7.5 million** one-time payment from a sub-license agreement with Baxalta (a Takeda subsidiary)[328](index=328&type=chunk)[329](index=329&type=chunk) - R&D expenses decreased by **$1.2 million** in 2018, mainly due to internal development efforts focusing on XBIO-101 and the non-recurrence of other project costs from 2017[333](index=333&type=chunk) - General and administrative expenses decreased by **$2.5 million** in 2018, primarily due to reduced discretionary spending and approximately **$0.6 million** in severance costs related to the former CEO in 2017[334](index=334&type=chunk) [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2018, the company had approximately $0.6 million in cash and a working capital deficit of $0.4 million, anticipating existing resources will only support operations until the first half of 2019. - As of December 31, 2018, the company's cash balance was approximately **$0.6 million**, with a working capital deficit of approximately **$0.4 million**[338](index=338&type=chunk)[337](index=337&type=chunk) - The company anticipates existing resources will only support planned operations until the first half of 2019, necessitating additional working capital in the near term to fund future operations, including XCART platform technology development[340](index=340&type=chunk) - Management believes capital can be obtained through equity offerings, debt financing, corporate collaborations, or related party financing, though no commitments for additional funding have been secured yet[341](index=341&type=chunk) - Operating cash outflow was approximately **$6.5 million** in 2018, primarily due to a **$7.3 million** net loss, partially offset by **$1.4 million** in non-cash expenses[344](index=344&type=chunk) - Operating activities generated a cash inflow of approximately **$1.5 million** in 2017, mainly from a **$3 million** clinical milestone payment received from Takeda[344](index=344&type=chunk) - Financing activities generated approximately **$1.5 million** in cash inflow in 2018, primarily from warrant exercises[346](index=346&type=chunk) [Contractual Obligations](index=66&type=section&id=Contractual%20Obligations) As of December 31, 2018, the company's contractual obligations primarily consisted of operating lease obligations totaling $24,583 for less than one year. Contractual Obligations as of December 31, 2018 | Obligation Type | Total (dollars) | Less than 1 year (dollars) | 1-3 years (dollars) | 3-5 years (dollars) | More than 5 years (dollars) | | :--- | :---: | :---: | :---: | :---: | :---: | | Operating Lease Obligations | 24,583 | 24,583 | 0 | 0 | 0 | - The company entered a new Framingham office lease agreement on January 7, 2019, for a **21-month term** until September 30, 2020, with total contractual obligations of approximately **$50,000**[350](index=350&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=Item%207A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company, as a smaller reporting company, is not required to provide this information. [Financial Statements and Supplementary Data](index=68&type=section&id=Item%208%20Financial%20Statements%20and%20Supplementary%20Data) This section includes the company's consolidated financial statements as of December 31, 2018, and 2017, comprising balance sheets, statements of comprehensive loss, statements of changes in stockholders' equity, and cash flow statements, along with related notes, with the independent registered public accounting firm issuing an unqualified opinion but noting substantial doubt about the company's going concern ability. [Report of Independent Registered Public Accounting Firm](index=69&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent registered public accounting firm issued an unqualified opinion on the company's consolidated financial statements as of December 31, 2018, and 2017. - The report includes an explanatory paragraph highlighting the company's recurring losses and negative operating cash flows since inception, with an accumulated deficit of **$153.2 million** as of December 31, 2018, which raises substantial doubt about its ability to continue as a going concern[359](index=359&type=chunk) [Consolidated Balance Sheets](index=70&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets present key financial positions as of December 31, 2018, and 2017, showing changes in assets, liabilities, and equity. Key Consolidated Balance Sheet Data (as of December 31) | Metric | 2018 (dollars) | 2017 (dollars) | | :--- | :---: | :---: | | Cash | 571,605 | 5,533,062 | | Restricted Cash | 66,510 | 66,510 | | Prepaid Expenses and Other | 555,856 | 285,005 | | Total Current Assets | 1,193,971 | 5,884,577 | | Property and Equipment, net | 4,956 | 27,846 | | Goodwill | 3,283,379 | 3,283,379 | | Indefinite-Lived Intangible Assets | 9,243,128 | 9,243,128 | | Other Assets | 705,660 | 724,713 | | **Total Assets** | **14,431,094** | **19,163,643** | | Accounts Payable | 934,147 | 786,779 | | Accrued Expenses | 664,029 | 1,135,653 | | Other Current Liabilities | 1,612 | 21,234 | | Total Current Liabilities | 1,599,788 | 1,943,666 | | Deferred Tax Liability | 2,918,518 | 2,918,518 | | **Total Liabilities** | **4,518,306** | **4,862,184** | | Preferred Stock | 2,774 | 3,090 | | Common Stock | 9,726 | 9,040 | | Additional Paid-in Capital | 168,161,329 | 165,249,912 | | Accumulated Deficit | (153,233,595) | (145,933,137) | | Accumulated Other Comprehensive Income | 253,734 | 253,734 | | Treasury Stock | (5,281,180) | (5,281,180) | | **Total Stockholders' Equity** | **9,912,788** | **14,301,459** | | **Total Liabilities and Stockholders' Equity** | **14,431,094** | **19,163,643** | [Consolidated Statements of Comprehensive Loss](index=71&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) The consolidated statements of comprehensive loss detail the company's financial performance for the years ended December 31, 2018, and 2017, showing a net loss of $7.3 million in 2018. Key Consolidated Statements of Comprehensive Loss Data (as of December 31) | Metric | 2018 (dollars) | 2017 (dollars) | | :--- | :---: | :---: | | License Revenue | 0 | 7,500,000 | | Collaboration Service Revenue | 0 | 85,000 | | **Total Revenue** | **0** | **7,585,000** | | Research and Development Cost of Revenue | 0 | (156,119) | | Research and Development Expenses | (2,883,952) | (4,060,000) | | General and Administrative Expenses | (4,392,375) | (6,937,643) | | **Operating Loss** | **(7,276,327)** | **(3,568,762)** | | Other Expenses | (24,640) | (24,552) | | Interest Income (Expense) | 509 | (1,818) | | **Total Other Expenses** | **(24,131)** | **(26,370)** | | **Net Loss** | **(7,300,458)** | **(3,595,132)** | | Basic and Diluted Loss Per Share | (0.80) | (0.41) | | Weighted Average Common Shares Outstanding (Basic and Diluted) | 9,070,883 | 8,665,763 | [Consolidated Statements of Changes in Stockholders' Equity](index=72&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) The consolidated statements of changes in stockholders' equity outline the movements in equity components for the years ended December 31, 2018, and 2017, reflecting a decrease in total equity. Overview of Changes in Stockholders' Equity (as of December 31) | Metric | 2017 Year-End Balance (dollars) | 2018 Changes (dollars) | 2018 Year-End Balance (dollars) | | :--- | :---: | :---: | :---: | | Preferred Stock Par Value | 3,090 | (316) | 2,774 | | Common Stock Par Value | 9,040 | 686 | 9,726 | | Additional Paid-in Capital | 165,249,912 | 2,911,417 | 168,161,329 | | Accumulated Deficit | (145,933,137) | (7,300,458) | (153,233,595) | | Accumulated Other Comprehensive Income | 253,734 | 0 | 253,734 | | Treasury Stock | (5,281,180) | 0 | (5,281,180) | | **Total Stockholders' Equity** | **14,301,459** | **(4,389,675)** | **9,912,788** | - Warrant exercises in 2018 contributed **$1.48 million** to additional paid-in capital, alongside the issuance of **370,000 shares of common stock**[369](index=369&type=chunk) - Conversion of Series B Preferred Stock to common stock in 2018 resulted in a **$316** decrease in preferred stock par value and a corresponding increase in common stock par value[369](index=369&type=chunk) - Share-based compensation expense in 2018 totaled **$1.3519 million**, with vendor equity payments of **$69,700** and warrant expense of **$10,200**[369](index=369&type=chunk) [Consolidated Statements of Cash Flows](index=73&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The consolidated statements of cash flows present the cash inflows and outflows from operating, investing, and financing activities for the years ended December 31, 2018, and 2017, showing a significant net cash outflow in 2018. Key Consolidated Statements of Cash Flows Data (as of December 31) | Metric | 2018 (dollars) | 2017 (dollars) | | :--- | :---: | :---: | | Net Cash from Operating Activities | (6,463,957) | 1,494,195 | | Net Cash from Investing Activities | 22,500 | (9,264) | | Net Cash from Financing Activities | 1,480,000 | 0 | | Net Change in Cash and Restricted Cash | (4,961,457) | 1,484,931 | | Cash and Restricted Cash, End of Period | 638,115 | 5,599,572 | - Operating activities resulted in a cash outflow of approximately **$6.5 million** in 2018, primarily due to a **$7.3 million** net loss, partially offset by **$1.4 million** in non-cash expenses[344](index=344&type=chunk) - Operating activities generated a cash inflow of approximately **$1.5 million** in 2017, mainly from a **$3 million** clinical milestone payment received from Takeda[344](index=344&type=chunk) - Investing activities generated a cash inflow of **$22,500** in 2018, primarily from the sale of laboratory equipment[345](index=345&type=chunk) - Financing activities generated a cash inflow of **$1.48 million** in 2018, primarily from warrant exercises[346](index=346&type=chunk) [Notes to the Consolidated Financial Statements](index=74&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and additional information supporting the consolidated financial statements, covering company overview, significant accounting policies, related party transactions, and subsequent events. [1. The Company](index=74&type=section&id=1.%20The%20Company) The company is a biopharmaceutical firm focused on next-generation biologics and novel oncology therapies, holding over 170 patents. - XBIO-101, the company's most advanced oncology candidate, has received FDA orphan drug designation, but its Phase II clinical trial halted patient enrollment in March 2019[376](index=376&type=chunk) - The company plans to acquire the XCART platform technology, aimed at developing CAR T-cell therapies for B-cell non-Hodgkin lymphoma, with the transaction expected to close in the first half of 2019[378](index=378&type=chunk)[380](index=380&type=chunk) - The company incurred a net loss of approximately **$7.3 million** in 2018, with an accumulated deficit of **$153.2 million** and negative working capital, raising substantial doubt about its ability to continue as a going concern[383](index=383&type=chunk) [2. Summary of Significant Accounting Policies](index=75&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) The company's financial statements are prepared under U.S. GAAP, based on a going concern assumption despite existing uncertainties. - The company adopted ASC 606, "Revenue from Contracts with Customers," on January 1, 2018, with no material impact on the consolidated financial statements due to the absence of revenue-generating customer contracts[405](index=405&type=chunk) - R&D expenses are recognized as incurred, encompassing personnel costs, facility expenses, clinical trial costs, and related manufacturing expenses[413](index=413&type=chunk) - Share-based compensation expenses (including options, RSUs, JSOPs, and common stock awards) are estimated at fair value using the Black-Scholes option pricing model and recognized on a straight-line basis over the vesting period[417](index=417&type=chunk) - Goodwill and indefinite-lived intangible assets (IPR&D) are not amortized but tested for impairment annually (October 1) or when business conditions change, with no impairment recorded in 2018 and 2017[399](index=399&type=chunk)[401](index=401&type=chunk) [3. Significant Strategic Drug Development Collaborations – Related Parties](index=84&type=section&id=3.%20Significant%20Strategic%20Drug%20Development%20Collaborations%20%E2%80%93%20Related%20Parties) The company has exclusive R&D and licensing agreements with Takeda (formerly Shire plc) for polysialylated blood coagulation factors using PolyXen technology, though Takeda terminated further development of SHP656 (PSA-rFVIII) in May 2017. - The company entered a sub-license agreement with Baxalta (a Takeda subsidiary) in October 2017, receiving a **$7.5 million** one-time payment and eligibility for single-digit royalties on net sales of Covered Products[438](index=438&type=chunk) - An exclusive license for PolyXen and OncoHist platform technologies in Russia and CIS countries was granted to SynBio LLC, which became a wholly-owned subsidiary of Pharmsynthez in 2017[439](index=439&type=chunk)[441](index=441&type=chunk) - An exclusive R&D and licensing agreement with PJSC Pharmsynthez covers PolyXen and ImuXen technologies in Russia and CIS countries; Pharmsynthez is the company's controlling shareholder, holding approximately **57.1% of common stock** as of December 31, 2018[445](index=445&type=chunk)[446](index=446&type=chunk) - An R&D collaboration agreement with Serum Institute of India Limited grants an exclusive license to develop PSA-EPO using PolyXen technology; Serum Institute is an affiliate, holding approximately **6.7% of common stock** as of December 31, 2018[442](index=442&type=chunk)[444](index=444&type=chunk) [4. Property and Equipment, net](index=86&type=section&id=4.%20Property%20and%20Equipment%2C%20net) Property and equipment, net, decreased from $27,846 in 2017 to $4,956 in 2018, primarily due to the sale of laboratory equipment. Property and Equipment, net (as of December 31) | Asset Category | 2018 (dollars) | 2017 (dollars) | | :--- | :---: | :---: | | Laboratory Equipment | 0 | 264,583 | | Office and Computer Equipment | 42,289 | 46,634 | | Leasehold Improvements | 26,841 | 26,841 | | Furniture and Fixtures | 20,263 | 20,263 | | **Property and Equipment – Cost** | **89,393** | **358,321** | | Less: Accumulated Depreciation | (84,437) | (330,475) | | **Property and Equipment – Net** | **4,956** | **27,846** | - Depreciation expense was approximately **$16,000** in 2018 and **$24,000** in 2017[447](index=447&type=chunk) - In 2018, the company sold certain laboratory equipment for **$22,500**, generating a gain of approximately **$15,000**[447](index=447&type=chunk) [5. Goodwill, Indefinite-Lived Intangible Assets and Other Long-Term Assets](index=86&type=section&id=5.%20Goodwill%2C%20Indefinite-Lived%20Intangible%20Assets%20and%20Other%20Long-Term%20Assets) Goodwill and indefinite-lived intangible assets remained unchanged at approximately $3.28 million and $9.2 million, respectively, as of December 31, 2018, with no impairment recorded. - As of December 31, 2018, and 2017, the carrying value of goodwill remained unchanged at approximately **$3.28 million**, with annual impairment tests showing no impairment[448](index=448&type=chunk) - The carrying value of indefinite-lived intangible asset OncoHist was approximately **$9.2 million** as of December 31, 2018, and 2017, with no impairment and no commercialization yet[449](index=449&type=chunk) - Other long-term assets include approximately **$0.7 million** in PSA supply, not expected to be substantially utilized within the next 12 months[450](index=450&type=chunk) [6. Accrued Expenses](index=88&type=section&id=6.%20Accrued%20Expenses) Accrued expenses decreased from $1,135,653 in 2017 to $664,029 in 2018, primarily due to the payment of accrued salaries and benefits related to a former CEO's settlement. Accrued Expenses (as of December 31) | Category | 2018 (dollars) | 2017 (dollars) | | :--- | :---: | :---: | | Accrued Salaries and Benefits | 53,541 | 723,488 | | Accrued Professional Fees | 394,075 | 389,086 | | Accrued Research Costs | 205,067 | 11,477 | | Other | 11,346 | 11,602 | | **Total** | **664,029** | **1,135,653** | - In 2017, the company recognized approximately **$0.4 million** in accrued salaries and benefits due to a settlement agreement with its former CEO, with this obligation fully paid by December 31, 2018[452](index=452&type=chunk) [7. Fair Value Measurements](index=88&type=section&id=7.%20Fair%20Value%20Measurements) The company utilizes a three-level fair value hierarchy, classifying fair value measurement inputs into three levels based on the lowest level input available. - As of December 31, 2018, and 2017, the company had no financial instruments classified as Level 3[454](index=454&type=chunk) [8. Income Taxes](index=88&type=section&id=8.%20Income%20Taxes) The company accounts for income taxes using the balance sheet method and fully reserves deferred tax assets with a valuation allowance, deeming their future realization unlikely. Pre-Tax Loss Composition (as of December 31) | Category | 2018 (dollars) | 2017 (dollars) | | :--- | :---: | :---: | | Domestic (U.S.) | (3,824,673) | (5,889,926) | | Foreign (U.K.) | (3,379,268) | 2,398,830 | | Foreign (Germany) | (96,517) | (104,036) | | **Pre-Tax Loss** | **(7,300,458)** | **(3,595,132)** | - As of December 31, 2018, the company had UK net operating loss carryforwards of approximately **$47.3 million**, US federal net operating loss carryforwards of approximately **$16.5 million**, US state net operating loss carryforwards of approximately **$16.2 million**, and German net operating loss carryforwards of approximately **$1.7 million**[457](index=457&type=chunk) - The company's net operating loss carryforwards and tax credits may be subject to limitations due to ownership changes under Section 382 of the U.S. Internal Revenue Code[464](index=464&type=chunk) [9. Stockholders' Equity](index=91&type=section&id=9.%20Stockholders%27%20Equity) As of March 15, 2019, the company had 10,443,889 shares of common stock issued, with details on preferred stock liquidation preferences and conversion rights. - As of March 15, 2019, the company had **10,443,889 shares of common stock issued**[5](index=5&type=chunk) - Series A Preferred Stock holders are entitled to a liquidation preference of **$4.80 per share** and are convertible into common stock on a **1:1 basis**[472](index=472&type=chunk)[474](index=474&type=chunk) - Series B Preferred Stock holders are entitled to a liquidation preference of **$4.00 per share**, senior to Series A Preferred Stock, and are convertible into common stock, subject to anti-dilution protection[483](index=483&type=chunk)[485](index=485&type=chunk)[488](index=488&type=chunk) - As of December 31, 2018, there were **539,202 shares** underlying warrants related to collaboration and consulting agreements, and **3,152,225 shares** underlying warrants related to financing agreements[492](index=492&type=chunk)[498](index=498&type=chunk) [10. Share-Based Expense](index=95&type=section&id=10.%20Share-Based%20Expense) Total share-based compensation expense decreased from $1,793,093 in 2017 to $1,431,787 in 2018, primarily due to reduced general and administrative expenses. Share-Based Expense (as of December 31) | Category | 2018 (dollars) | 2017 (dollars) | | :--- | :---: | :---: | | Research and Development Expenses | 203,030 | 101,401 | | General and Administrative Expenses | 1,228,757 | 1,691,692 | | **Total** | **1,431,787** | **1,793,093** | - In 2017, the company modified certain former employee stock option awards, extending their expiration dates and accelerating vesting for some employees, resulting in approximately **$0.2 million** in incremental compensation expense[500](index=500&type=chunk)[501](index=501&type=chunk) - **100,000 stock options** were granted to employees in 2018 with a weighted-average grant date fair value of **$2.63**; **700,000 options** were granted in 2017 with a fair value of **$2.70**[503](index=503&type=chunk) - As of December 31, 2018, unrecognized share-based compensation expense for employee stock options was approximately **$1 million**, expected to be recognized over a weighted-average period of approximately **1.3 years**[504](index=504&type=chunk) - **50,000 restricted stock units (RSUs)** were granted in 2017, with no grants in 2018, and **16,667 RSUs** vested in 2018[506](index=506&type=chunk) - **10,000 stock options** were granted to non-employees in 2018, with no grants in 2017; all non-employee stock options were vested as of December 31, 2018[509](index=509&type=chunk)[510](index=510&type=chunk) [11. Employee Benefit Plans](index=99&type=section&id=11.%20Employee%20Benefit%20Plans) The company maintains a 401(k) savings plan in the US, with no company contributions in 2018, and a defined contribution plan in the UK with no contributions in 2018 and 2017. - The company maintains a 401(k) savings plan in the US, with **no company contributions in 2018** and contributions of approximately **$51,000** in 2017[514](index=514&type=chunk) - In the UK, the company operates a defined contribution plan compliant with HM Revenue & Customs, with company contributions ranging from **8% to 12% of employee salaries**, and **no contributions in 2018 and 2017**[515](index=515&type=chunk) [12. Commitments and Contingent Liabilities](index=99&type=section&id=12.%20Commitments%20and%20Contingent%20Liabilities) The company's Lexington, Massachusetts lease expired in January 2019, requiring a $66,000 letter of credit as security until May 1, 2019, while its Miami, Florida office lease was renewed until November 30, 2019. Contractual Commitments as of December 31, 2018 | Period | Total Operating Lease (dollars) | | :--- | :---: | | 2019 | 24,583 | | 2020 | 0 | | **Total Minimum Lease Payments** | **24,583** | - The company's Lexington, Massachusetts lease expired in January 2019, and a **$66,000** letter of credit must be maintained as security until May 1, 2019[516](index=516&type=chunk) - The company's Miami, Florida office lease has been renewed until November 30, 2019[517](index=517&type=chunk) - The company entered a new Framingham office lease agreement in January 2019, with total contractual obligations of approximately **$50,000**, for a term extending to September 30, 2020[520](index=520&type=chunk) - The company paid approximately **$0.6 million** in December 2017 to resolve litigation with former supplier Eurogentec S.A[521](index=521&type=chunk) [13. Related Party Transactions](index=101&type=section&id=13.%20Related%20Party%20Transactions) The company has entered into various R&D, licensing, and supply agreements with related parties, including Takeda, SynBio, Serum Institute, and Pharmsynthez. - In 2017, the company received approximately **$100,000** in research and consulting services from a director of Pharmsynthez, with the consulting agreement terminated in July 2017[523](index=523&type=chunk) [14. Subsequent Events](index=101&type=section&id=14.%20Subsequent%20Events) The company signed an agreement on March 1, 2019, to acquire all outstanding shares of Hesperix SA, involving the issuance of 4,875,000 shares of common stock to the seller. - The XCART transaction's completion is contingent on customary closing conditions, including sufficient financing for future working capital obligations and necessary shareholder approvals, with an expected close in the first half of 2019[529](index=529&type=chunk) - The company also entered into an assignment agreement with OPKO Pharmaceuticals, LLC to acquire OPKO's rights in the XCART technology-related intellectual property license agreements, issuing **1,968,750 shares of common stock** to OPKO and **656,250 shares** to The Scripps Research Institute[531](index=531&type=chunk)[532](index=532&type=chunk) - On March 5, 2019, the company raised approximately **$3.1 million** in gross proceeds (net proceeds of **$2.7 million**) through a registered direct offering, issuing **1,040,000 shares of common stock** and **509,000 pre-funded warrants**[533](index=533&type=chunk) - Concurrently, the company sold warrants to purchasers, exercisable for up to **1,549,000 shares of common stock** at an exercise price of **$2.25 per share**, with an exercise period commencing September 8, 2019, and a seven-year term[534](index=534&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=104&type=section&id=Item%209%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This item is not applicable to the company. [Controls and Procedures](index=104&type=section&id=Item%209A%20Controls%20and%20Procedures) As of December 31, 2018, management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level, and internal control over financial reporting was also effective. - As of December 31, 2018, the company's management, including the Chief Executive Officer and Chief Financial Officer, assessed and concluded that its disclosure controls and procedures were effective at a reasonable assurance level[537](index=537&type=chunk) - Management believes that, as of December 31, 2018, the company's internal control over financial reporting was effective, meeting the COSO framework criteria[538](index=538&type=chunk) - This annual report does not include an attestation report of the registered public accounting firm regarding internal control over financial reporting, as the company qualifies for an exemption as a non-accelerated filer[539](index=539&type=chunk) - No material changes in the company's internal control over financial reporting occurred during the reporting period[540](index=540&type=chunk) [Other Information](index=105&type=section&id=Item%209B%20Other%20Information) This item is not applicable to the company. Part III [Directors, Executive Officers and Corporate Governance](index=106&type=section&id=Item%2010%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The information required for this item will be incorporated by reference from the company's definitive proxy statement or information statement for its 2019 Annual Meeting of Stockholders, or an amendment to this Annual Report on Form 10-K. - The information required for this item will be incorporated by reference from the company's definitive proxy statement or information statement for its 2019 Annual Meeting of Stockholders[546](index=546&type=chunk) [Executive Compensation](index=106&type=section&id=Item%2011%20Executive%20Compensation) The information required for this item will be incorporated by reference from the company's definitive proxy statement or information statement for its 2019 Annual Meeting of Stockholders, or an amendment to this Annual Report on Form 10-K. - The information required for this item will be incorporated by reference from the company's definitive proxy statement or information statement for its 2019 Annual Meeting of Stockholders[547](index=547&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=106&type=section&id=Item%2012%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) The information required for this item will be incorporated by reference from the company's definitive proxy statement or information statement for its 2019 Annual Meeting of Stockholders, or an amendment to this Annual Report on Form 10-K. - The information required for this item will be incorporated by reference from the company's definitive proxy statement or information statement for its 2019 Annual Meeting of Stockholders[548](index=548&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=106&type=section&id=Item%2013%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information required for this item will be incorporated by reference from the company's definitive proxy statement or information statement for its 2019 Annual Meeting of Stockholders, or an amendment to this Annual Report on Form 10-K. - The information required for this item will be incorporated by reference from the company's definitive proxy statement or information statement for its 2019 Annual Meeting of Stockholders[549](index=549&type=chunk) [Principal Accounting Fees and Services](index=106&type=section&id=Item%2014%20Principal%20Accounting%20Fees%20and%20Services) The information required for this item will be incorporated by reference from the company's definitive proxy statement or information statement for its 2019 Annual Meeting of Stockholders, or an amendment to this Annual Report on Form 10-K. - The information required for this item will be incorporated by reference from the company's definitive proxy statement or information statement for its 2019 Annual Meeting of Stockholders[550](index=550&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=107&type=section&id=Item%2015%20Exhibits%2C%20Financial%20Statement%20Schedules) This item lists the exhibits filed or furnished as part of the Annual Report on Form 10-K, including consolidated financial statements and the independent registered public accounting firm's report. - This item lists the exhibits filed or furnished as part of the Annual Report on Form 10-K, including consolidated financial statements and the independent registered public accounting firm's report[555](index=555&type=chunk) [Form 10-K Summary](index=107&type=section&id=Item%2016%20Form%2010-K%20Summary) This item is not applicable to the company.