[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements, management's discussion, market risk, and internal controls [Item 1 - Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201%20-%20Condensed%20Consolidated%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements for the quarter, along with detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202021%20%28Unaudited%29%20and%20December%2031%2C%202020) This section presents the company's financial position, detailing assets, liabilities, and equity at quarter-end and year-end - The company's total assets decreased from **$13.18 million** at December 31, 2020, to **$11.76 million** at March 31, 2021, primarily driven by a decrease in cash. Total liabilities also decreased, resulting in a reduction in total stockholders' equity[10](index=10&type=chunk) Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2021 (USD) | December 31, 2020 (USD) | | :--------------------------------- | :------------- | :---------------- | | Cash | $10,008,364 | $11,527,552 | | Total current assets | $11,036,113 | $12,369,510 | | Total assets | $11,761,622 | $13,179,495 | | Total current liabilities | $798,191 | $936,928 | | Total liabilities | $815,759 | $963,971 | | Total stockholders' equity | $10,945,863 | $12,215,524 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20%28Unaudited%29%20for%20the%20three%20months%20ended%20March%2031%2C%202021%20and%202020) This section presents the company's financial performance, including revenues, expenses, and net loss, for the three months ended March 31, 2021, and 2020 - For the three months ended March 31, 2021, the company reported a net loss of **$1.35 million**, an increase from **$1.18 million** in the prior year, primarily due to higher research and development expenses and a decrease in interest income, despite a significant increase in royalty revenue[12](index=12&type=chunk) Condensed Consolidated Statements of Operations Highlights (Three Months Ended March 31) | Metric | 2021 (USD) | 2020 (USD) | Change (USD) | % Change | | :--------------------------------- | :----------- | :----------- | :----------- | :------- | | Royalty revenue | $191,216 | $56,749 | $134,467 | 237.0% | | Research and development expenses | $(629,729) | $(359,651) | $(270,078) | 75.1% | | General and administrative expenses | $(930,578) | $(927,880) | $(2,698) | 0.3% | | Total operating costs and expenses | $(1,560,307) | $(1,287,531) | $(272,776) | 21.2% | | Loss from operations | $(1,369,091) | $(1,230,782) | $(138,309) | 11.2% | | Net loss | $(1,345,945) | $(1,179,429) | $(166,516) | 14.1% | | Basic and diluted loss per share | $(0.15) | $(0.19) | $0.04 | -21.1% | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20%28Unaudited%29%20for%20the%20three%20months%20ended%20March%2031%2C%202021%20and%202020) This section details changes in the company's stockholders' equity, including net loss and share-based expenses, for the three months ended March 31, 2021, and 2020 - Total stockholders' equity decreased from **$12.22 million** at January 1, 2021, to **$10.95 million** at March 31, 2021, primarily due to the net loss incurred during the period, partially offset by share-based expense[15](index=15&type=chunk) Stockholders' Equity Changes (Three Months Ended March 31, 2021) | Item | Amount (USD) | | :--------------------------------- | :------------- | | Balance as of January 1, 2021 | $12,215,524 | | Share-based expense | $76,284 | | Exercise of purchase warrants | $0 | | Net loss | $(1,345,945) | | Balance as of March 31, 2021 | $10,945,863 | Stockholders' Equity Changes (Three Months Ended March 31, 2020) | Item | Amount (USD) | | :--------------------------------- | :------------- | | Balance as of January 1, 2020 | $17,213,251 | | Share-based expense | $165,598 | | Exercise of purchase warrants | $0 | | Net loss | $(1,179,429) | | Balance as of March 31, 2020 | $16,199,420 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29%20for%20the%20three%20months%20ended%20March%2031%2C%202021%20and%202020) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2021, and 2020 - The company experienced a net cash outflow from operating activities of **$1.52 million** for the three months ended March 31, 2021, an increase from **$1.00 million** in the prior year, primarily driven by the net loss and changes in operating assets and liabilities[21](index=21&type=chunk) Condensed Consolidated Statements of Cash Flows Highlights (Three Months Ended March 31) | Metric | 2021 (USD) | 2020 (USD) | | :--------------------------------- | :----------- | :----------- | | Net loss | $(1,345,945) | $(1,179,429) | | Net cash used in operating activities | $(1,519,188) | $(1,000,720) | | Net change in cash | $(1,519,188) | $(1,000,720) | | Cash at beginning of period | $11,527,552 | $10,367,920 | | Cash at end of period | $10,008,364 | $9,367,200 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) These notes provide detailed disclosures on the company's background, financial health, accounting policies, strategic collaborations, and other financial instruments, offering context to the condensed consolidated financial statements [Note 1. The Company](index=9&type=section&id=1.%20The%20Company) This note describes Xenetic Biosciences' core business, including its key technologies and financial viability as a going concern - Xenetic Biosciences is a biopharmaceutical company focused on two core technologies: XCART, a personalized CAR T platform for B-cell lymphomas, and PolyXen, a drug delivery platform for protein/peptide therapeutics[24](index=24&type=chunk)[25](index=25&type=chunk) - The company has incurred substantial losses since inception and expects continued operating losses, raising substantial doubt about its ability to continue as a going concern. Existing financing from a December 2020 offering is expected to fund operations through May 2022, but additional long-term capital will be required[28](index=28&type=chunk) [Note 2. Impact of COVID-19](index=10&type=section&id=2.%20Impact%20of%20COVID-19) This note assesses the impact of the COVID-19 pandemic on the company's operations and financial results - The COVID-19 pandemic has not significantly impacted the company's operations as of March 31, 2021, but the future impact on business, operations, and financial results remains uncertain and unpredictable[30](index=30&type=chunk) [Note 3. Summary of Significant Accounting Policies](index=10&type=section&id=3.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and policies applied in preparing the condensed consolidated interim financial statements - The condensed consolidated interim financial statements are prepared in accordance with SEC rules, including normal and recurring adjustments, and should be read with the Annual Report on Form 10-K for the year ended December 31, 2020[31](index=31&type=chunk) - Basic and diluted net loss per share are the same due to the company's net loss position, as potentially dilutive securities would be anti-dilutive[34](index=34&type=chunk) - The company is evaluating ASU 2016-13 (Financial Instruments - Credit Losses), effective for smaller reporting public entities for fiscal years beginning after December 15, 2022, but does not anticipate a material effect on its consolidated financial statements[35](index=35&type=chunk) [Note 4. Significant Strategic Collaborations](index=11&type=section&id=4.%20Significant%20Strategic%20Collaborations) This note details the company's key collaborations, including royalty revenue from a sublicense and funding commitments for preclinical development Royalty Revenue from Takeda Sublicense | Period | Royalty Revenue (USD) | | :--------------------------------- | :-------------- | | Three months ended March 31, 2021 | ~$0.2 million | | Three months ended March 31, 2020 | ~$0.1 million | - The company has committed up to **$3.0 million** to Scripps Research under a Research Funding and Option Agreement to advance XCART preclinical development, with **$1.2 million** paid through March 31, 2021[37](index=37&type=chunk) [Note 5. Property and Equipment, net](index=11&type=section&id=5.%20Property%20and%20Equipment%2C%20net) This note provides information on the company's property and equipment, including net book value and depreciation expense Property and Equipment, Net | Category | March 31, 2021 (USD) | December 31, 2020 (USD) | | :--------------------------------- | :------------- | :---------------- | | Property and equipment – net | $0 | $0 | - No depreciation expense was recorded for the three months ended March 31, 2021, compared to approximately **$1,000** for the same period in 2020[38](index=38&type=chunk) [Note 6. Indefinite-Lived Intangible Assets](index=12&type=section&id=6.%20Indefinite-Lived%20Intangible%20Assets) This note discusses the impairment of the company's indefinite-lived intangible asset, OncoHist, and the reasons behind it - The indefinite-lived intangible asset, OncoHist (in-process research and development), was fully impaired in the third quarter of 2020, resulting in a **$9.2 million** charge[40](index=40&type=chunk) - The impairment was due to management's decision to indefinitely delay further development and not support the underlying intellectual property, along with the failure to sell or license the IPR&D and a reduction in market capitalization[40](index=40&type=chunk) [Note 7. Fair Value Measurements](index=12&type=section&id=7.%20Fair%20Value%20Measurements) This note explains the fair value measurement of the company's financial instruments and their classification within the fair value hierarchy - The carrying amounts of the company's financial instruments approximate fair value due to their short maturities[41](index=41&type=chunk) - No financial instruments were classified as Level 3 in the fair value hierarchy during the three months ended March 31, 2021 and 2020[41](index=41&type=chunk) [Note 8. Stockholders' Equity](index=12&type=section&id=8.%20Stockholders%27%20Equity) This note provides details on the company's stockholders' equity, including outstanding warrants and their exercise or expiration Outstanding Warrants as of March 31, 2021 | Type of Warrant | Shares | Average Weighted Exercise Price (USD) | Expiration Dates | | :--------------------------------- | :----- | :------------------------------ | :--------------- | | Collaboration warrants | 30,307 | $124.74 | April 2021 - May 2021 | | Debt and equity financing warrants | 347,505 | $36.74 | July 2021 - September 2026 | - During the three months ended March 31, 2021, approximately **1,485** debt and equity financing warrants were exercised on a cashless basis, and approximately **29,000** debt and equity warrants expired[43](index=43&type=chunk) [Note 9. Share-Based Expense](index=13&type=section&id=9.%20Share-Based%20Expense) This note details the share-based compensation expense recognized by the company for the three months ended March 31, 2021, and 2020 Share-Based Expense (Three Months Ended March 31) | Category | 2021 (USD) | 2020 (USD) | | :--------------------------------- | :--------- | :--------- | | Research and development expenses | $10,710 | $13,358 | | General and administrative expenses | $65,574 | $152,240 | | Total share-based expense | $76,284 | $165,598 | - The company granted **200,000** employee stock option awards during the three months ended March 31, 2021, with a weighted average grant date fair value of **$2.34** per option share[45](index=45&type=chunk) [Note 10. Income Taxes](index=13&type=section&id=10.%20Income%20Taxes) This note explains the company's income tax position, including the absence of a tax provision due to losses and the valuation allowance against deferred tax assets - No provision for income taxes was recorded for the three months ended March 31, 2021 and 2020, as the company incurred losses in both periods[47](index=47&type=chunk) Valuation Allowance Against Deferred Tax Assets | Date | Valuation Allowance (USD) | | :--------------------------------- | :------------------ | | March 31, 2021 | ~$29.9 million | | December 31, 2020 | ~$29.6 million | [Note 11. Commitments](index=14&type=section&id=11.%20Commitments) This note provides details on the company's contractual commitments, specifically related to operating lease liabilities Operating Lease Information (March 31, 2021) | Item | Amount (USD) | | :--------------------------------- | :------- | | Cash paid for lease liabilities | $8,413 | | Right-of-use assets - ST | $36,545 | | Right-of-use assets - LT | $17,568 | | Current lease liabilities | $36,545 | | Non-current lease liabilities | $17,568 | [Note 12. Related Party Transactions](index=14&type=section&id=12.%20Related%20Party%20Transactions) This note discloses the company's ongoing agreements and financial transactions with related parties, including interest income and development expenses - The company has ongoing related party agreements with Serum Institute, Pharmsynthez, and SynBio[51](index=51&type=chunk) Interest Income from Pharmsynthez Loan | Period | Interest Income (USD) | | :--------------------------------- | :-------------- | | Three months ended March 31, 2021 | ~$12,000 | | Three months ended March 31, 2020 | ~$13,000 | - Under a Master Services Agreement with Pharmsynthez for XCART technology development, approximately **$0.1 million** was expensed in Q1 2021, and **$0.1 million** in milestone payments have been made. The total estimated cost for the Stage 1 study under the Work Order is approximately **$1.8 million**[55](index=55&type=chunk)[57](index=57&type=chunk) [Note 13. Subsequent Events](index=15&type=section&id=13.%20Subsequent%20Events) This note confirms that no subsequent events requiring disclosure were identified up to the financial statement issuance date - No subsequent events requiring recognition or disclosure were identified through the date of financial statement issuance[58](index=58&type=chunk) [Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202%20-%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2021, highlighting key financial changes, business developments, and liquidity outlook, along with forward-looking statements and risk factors [Cautionary Note Regarding Forward-Looking Statements](index=16&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This note advises readers that the report contains forward-looking statements subject to risks and uncertainties that may cause actual results to differ - The report contains forward-looking statements regarding future results, business strategy, drug candidate development (including XCART), clinical trials, regulatory approvals, and collaborations[60](index=60&type=chunk) - These statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from expectations, including factors discussed in the "Risk Factors" section[61](index=61&type=chunk)[64](index=64&type=chunk) [Business Overview](index=17&type=section&id=BUSINESS%20OVERVIEW) This section provides an overview of the company's strategic focus, including its core technologies and the status of its key development programs - The company's primary focus is on advancing XCART, a personalized CAR T platform technology for B-cell lymphomas, through preclinical efforts in collaboration with Scripps Research and PJSC Pharmsynthez[65](index=65&type=chunk) - Xenetic also leverages its PolyXen drug delivery platform, which uses polysialic acid to prolong drug half-life and improve pharmacological properties, generating ongoing royalties from a license to an industry partner[66](index=66&type=chunk)[67](index=67&type=chunk) - Development of the XBIO-101 oncology therapeutic for endometrial cancer has been suspended due to patient enrollment and retention challenges in its Phase 2 trial[68](index=68&type=chunk)[69](index=69&type=chunk) [Critical Accounting Estimates](index=18&type=section&id=Critical%20Accounting%20Estimates) This section confirms that there have been no material changes to the company's critical accounting estimates since the last annual report - No material changes to critical accounting estimates have occurred since those described in the Annual Report on Form 10-K for the year ended December 31, 2020[71](index=71&type=chunk) [Effects of the COVID-19 Pandemic](index=18&type=section&id=Effects%20of%20the%20COVID-19%20Pandemic) This section discusses the limited direct impact of the COVID-19 pandemic on company operations during the period, while acknowledging future uncertainties - Company operations were not materially affected by the COVID-19 pandemic during the three months ended March 31, 2021[72](index=72&type=chunk) - The ultimate impact of the COVID-19 pandemic on financial condition and results of operations is uncertain and dependent on future developments, with potential for material adverse effects if the global response escalates or is ineffective[72](index=72&type=chunk) [Results of Operations](index=19&type=section&id=RESULTS%20OF%20OPERATIONS) This section details the financial performance for the three months ended March 31, 2021, compared to the same period in 2020, showing a significant increase in royalty revenue but also a rise in research and development expenses, leading to an increased net loss [Revenue](index=19&type=section&id=Revenue) This section analyzes the company's revenue performance, primarily focusing on the increase in royalty revenue for the period Revenue Performance (Three Months Ended March 31) | Metric | 2021 (USD) | 2020 (USD) | Change (USD) | % Change | | :--------------------------------- | :----------- | :----------- | :----------- | :------- | | Royalty revenue | $191,216 | $56,749 | $134,467 | 237.0% | - The increase in royalty revenue is attributed to the sublicensee's continued worldwide launch of the product related to the PolyXen technology[74](index=74&type=chunk) [Research and Development Expenses](index=19&type=section&id=Research%20and%20Development%20Expenses) This section examines the changes in research and development expenses, highlighting increased spending on the XCART platform Research and Development Expenses (Three Months Ended March 31) | Category of Expense | 2021 (USD) | 2020 (USD) | Change (USD) | % Change | | :--------------------------------- | :--------- | :--------- | :--------- | :------- | | Outside services and contract research organizations | $452,625 | $223,622 | $229,003 | 102.4% | | Salaries and wages | $130,047 | $89,842 | $40,205 | 44.7% | | Share-based expense | $10,710 | $13,358 | $(2,648) | -19.8% | | Other | $36,347 | $32,829 | $3,518 | 10.7% | | Total research and development expense | $629,729 | $359,651 | $270,078 | 75.1% | - The increase in R&D was primarily driven by higher spending on the XCART platform technology's preclinical development, partially offset by decreased spending on the XBIO-101 Phase 2 clinical trial, which was closed in Q1 2021[76](index=76&type=chunk) [General and Administrative Expenses](index=20&type=section&id=General%20and%20Administrative%20Expenses) This section reviews the general and administrative expenses, noting stable costs due to offsetting increases and decreases in various categories General and Administrative Expenses (Three Months Ended March 31) | Metric | 2021 (USD) | 2020 (USD) | Change (USD) | % Change | | :--------------------------------- | :--------- | :--------- | :--------- | :------- | | General and administrative | $(930,578) | $(927,880) | $(2,698) | 0.3% | - Increases in consulting and employee-related costs were substantially offset by lower share-based expense and legal and accounting costs, resulting in stable G&A expenses[77](index=77&type=chunk) [Other Income (Expense)](index=20&type=section&id=Other%20Income%20%28Expense%29) This section analyzes the changes in other income and expense, primarily attributing the increase to foreign currency exchange rates Other Income (Expense) (Three Months Ended March 31) | Metric | 2021 (USD) | 2020 (USD) | Change (USD) | % Change | | :--------------------------------- | :------- | :------- | :------- | :------- | | Other income (expense) | $884 | $(134) | $1,018 | 759.7% | - The increase in other income was primarily related to changes in foreign currency exchange rates[78](index=78&type=chunk) [Interest Income](index=20&type=section&id=Interest%20Income) This section discusses the decrease in interest income, primarily due to lower interest rates on invested funds Interest Income (Three Months Ended March 31) | Metric | 2021 (USD) | 2020 (USD) | Change (USD) | % Change | | :--------------------------------- | :------- | :------- | :------- | :------- | | Interest income | $22,262 | $51,487 | $(29,225) | -56.8% | - The decrease in interest income was primarily due to lower interest rates on invested funds[79](index=79&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's financial liquidity, capital resources, and ability to fund operations, highlighting the net loss and need for additional capital - The company reported a net loss of **$1.3 million** and an accumulated deficit of **$178.2 million** as of March 31, 2021. Working capital decreased by **$1.2 million** to **$10.2 million**[80](index=80&type=chunk) - While current resources are expected to fund operations through May 2022, the company anticipates needing additional long-term capital and faces substantial doubt about its ability to continue as a going concern[82](index=82&type=chunk) [Cash Flows from Operating Activities](index=21&type=section&id=Cash%20Flows%20from%20Operating%20Activities) This section analyzes the cash flows generated or used in operating activities, primarily driven by net loss and non-cash charges Cash Flows from Operating Activities (Three Months Ended March 31) | Metric | 2021 (USD) | 2020 (USD) | | :--------------------------------- | :----------- | :----------- | | Net cash used in operating activities | $(1,519,188) | $(1,000,720) | - The increase in cash used in operating activities was primarily due to the net loss for the period, partially offset by non-cash charges associated with share-based expense[83](index=83&type=chunk) [Cash Flows from Investing Activities](index=21&type=section&id=Cash%20Flows%20from%20Investing%20Activities) This section reports on the absence of cash flows from investing activities for the current and prior periods - No cash flows from investing activities were reported for the three months ended March 31, 2021, and 2020[84](index=84&type=chunk) [Cash Flow from Financing Activities](index=21&type=section&id=Cash%20Flow%20from%20Financing%20Activities) This section indicates that there were no cash flows from financing activities during the reporting periods - No cash flows from financing activities were reported for the three months ended March 31, 2021, and 2020[85](index=85&type=chunk) [Contractual Obligations and Commitments](index=21&type=section&id=Contractual%20Obligations%20and%20Commitments) This section confirms no material changes to the company's contractual obligations and commitments since the last annual report - No material changes to contractual obligations and commitments since the Annual Report on Form 10-K for the year ended December 31, 2020[86](index=86&type=chunk) [Off Balance Sheet Arrangements](index=21&type=section&id=Off%20Balance%20Sheet%20Arrangements) This section states that the company has no off-balance sheet financing arrangements with a material financial effect - The company does not have any off-balance sheet financing arrangements that are likely to have a material effect on its financial condition or results of operations[87](index=87&type=chunk) [Recent Accounting Standards](index=21&type=section&id=Recent%20Accounting%20Standards) This section refers to the annual report for a discussion of recent accounting standards - Refer to Note 3 in the Annual Report on Form 10-K for the year ended December 31, 2020, for a discussion of recent accounting standards[88](index=88&type=chunk) [Critical Accounting Policies and Estimates](index=21&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms no material changes in critical accounting policies since the last annual report - No material changes in critical accounting policies from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020[89](index=89&type=chunk) [Item 3 - Quantitative and Qualitative Disclosures About Market Risk](index=21&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is not required to provide information on quantitative and qualitative disclosures about market risk as it qualifies as a "smaller reporting company" - The company is exempt from providing quantitative and qualitative disclosures about market risk because it is a "smaller reporting company"[90](index=90&type=chunk) [Item 4 - Controls and Procedures](index=22&type=section&id=Item%204%20-%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2021, and there were no material changes in internal control over financial reporting during the period [Evaluation of Disclosure Controls and Procedures](index=22&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports management's conclusion on the effectiveness of the company's disclosure controls and procedures - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2021[93](index=93&type=chunk) [Changes in Internal Control over Financial Reporting](index=22&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section confirms that no material changes occurred in the company's internal control over financial reporting during the period - No material changes in internal control over financial reporting occurred during the period covered by this report[94](index=94&type=chunk) [PART II - OTHER INFORMATION](index=23&type=section&id=PART%20II%20OTHER%20INFORMATION) This section provides additional information not covered in Part I, including legal proceedings, risk factors, equity sales, and exhibits [Item 1 - Legal Proceedings](index=23&type=section&id=Item%201%20-%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings, nor are any threatened, and does not expect any incidental legal proceedings to have a material effect on its financial condition or results of operations - The company is not currently subject to any material legal proceedings, nor are any threatened[97](index=97&type=chunk) - Incidental legal proceedings are not expected to have a material effect on financial condition or results of operations[97](index=97&type=chunk) [Item 1A - Risk Factors](index=23&type=section&id=Item%201A%20-%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes to risk factors since the Annual Report on Form 10-K for the year ended December 31, 2020[98](index=98&type=chunk) [Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds](index=23&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds to report[99](index=99&type=chunk) [Item 3 - Defaults Upon Senior Securities](index=23&type=section&id=Item%203%20-%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report during the period - No defaults upon senior securities to report[100](index=100&type=chunk) [Item 4 - Mine Safety Disclosures](index=23&type=section&id=Item%204%20-%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine safety disclosures are not applicable to the company[101](index=101&type=chunk) [Item 5 - Other Information](index=23&type=section&id=Item%205%20-%20Other%20Information) There is no other information to report under this item - No other information to report[102](index=102&type=chunk) [Item 6 - Exhibits](index=24&type=section&id=Item%206%20-%20Exhibits) This section lists the exhibits filed as part of the report, including certifications under the Sarbanes-Oxley Act and Inline XBRL documents - The exhibits include certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[105](index=105&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) are filed as part of the report[105](index=105&type=chunk) [Signatures](index=25&type=section&id=Signatures) This section provides the official signatures of the company's executive officers, certifying the report's contents - The report is signed by Jeffrey F. Eisenberg, Chief Executive Officer, and James Parslow, Chief Financial Officer, on May 11, 2021[110](index=110&type=chunk)

PART I [ITEM 1 – BUSINESS](index=8&type=section&id=ITEM%201%20%E2%80%93%20BUSINESS) Xenetic Biosciences, Inc. is a biopharmaceutical company focused on advancing its personalized CAR T platform technology, XCART, for B-cell lymphomas, while also leveraging its PolyXen drug delivery platform through partnerships [Overview](index=8&type=section&id=Overview) Xenetic Biosciences is a biopharmaceutical company focused on XCART, a personalized CAR T platform technology targeting patient- and tumor-specific neoantigens for B-cell lymphomas[24](index=24&type=chunk) - The XCART technology, developed by Scripps Research and IBCH, aims to enhance the safety and efficacy of cell therapy for B-cell lymphomas by generating patient- and tumor-specific CAR T cells[24](index=24&type=chunk)[27](index=27&type=chunk) - The company also utilizes its proprietary PolyXen drug delivery platform to prolong drug half-life and improve pharmacological properties, partnering with other companies for its application[29](index=29&type=chunk)[30](index=30&type=chunk) - Development of XBIO-101 for progestin-resistant endometrial cancer has been suspended due to patient enrollment and retention challenges in its Phase 2 trial[31](index=31&type=chunk)[32](index=32&type=chunk) [Our Strategy](index=9&type=section&id=Our%20Strategy) The company's primary strategy is to advance the XCART technology through regulatory approval and commercialization for B-cell Lymphomas, while also seeking industry collaborations for other uses and indications - Xenetic plans to opportunistically advance its PolyXen platform through collaborative out-license arrangements to generate shareholder value and working capital for XCART development[35](index=35&type=chunk) - The company intends to pursue orphan drug designations and accelerated approval pathways for relevant oncology indications in the U.S. and Europe[36](index=36&type=chunk) [Business Developments](index=10&type=section&id=Business%20Developments) Key business developments in 2020 included a research funding agreement with Scripps Research, a Master Services Agreement with Pharmsynthez for XCART development, and a registered direct offering to increase capital - On May 15, 2020, Xenetic entered into a Research Funding and Option Agreement with Scripps Research, committing up to **$3.0 million** to fund preclinical development of XCART over 27 months[38](index=38&type=chunk) - On June 12, 2020, a Master Services Agreement (MSA) was signed with Pharmsynthez to advance XCART development for B-cell malignancies, with an estimated total cost of approximately **$1.8 million** for a Stage 1 study and potential milestone payments up to **$1,050,000**[39](index=39&type=chunk)[40](index=40&type=chunk) - On December 4, 2020, shareholders approved an increase in authorized Common Stock to **50,000,000 shares**[42](index=42&type=chunk) - On December 10, 2020, the company completed a registered direct offering of **2,448,980 shares** of Common Stock at **$2.45 per share**, generating approximately **$6.0 million** in gross proceeds[43](index=43&type=chunk) [Our Technology and Drug Candidates](index=11&type=section&id=Our%20Technology%20and%20Drug%20Candidates) The company's patent portfolio covers five core proprietary technologies, with a primary focus on oncology drugs and future development anticipated solely on the XCART platform - The company's patent portfolio spans five core proprietary technologies: XCART, XBIO-101, PolyXen, OncoHist, and ImuXen, with a primary focus on oncology drugs[44](index=44&type=chunk) - In 2020, internal development efforts were limited to winding down the XBIO-101 Phase 2 trial and preliminary XCART development, with future focus anticipated solely on XCART[45](index=45&type=chunk) - XCART is a personalized CAR T platform targeting patient-specific tumor neoantigens for B-cell lymphomas, aiming for enhanced safety and efficacy with limited off-tumor toxicities[45](index=45&type=chunk) - PolyXen is a drug delivery platform using polysialic acid (PSA) to extend drug circulation time and improve pharmacological properties[46](index=46&type=chunk) - OncoHist is a therapeutic platform utilizing modified human histone H1.3 for targeted cell apoptosis across various cancer indications[46](index=46&type=chunk) - ImuXen is a liposomal co-entrapment encapsulation technology designed to maximize cell and immune system-mediated responses for vaccines[46](index=46&type=chunk) [Research, Outside Services and Collaborations](index=12&type=section&id=Research%2C%20Outside%20Services%20and%20Collaborations) The company relies on third-party contract manufacturers, CROs, and strategic collaborations for pipeline development, as it lacks in-house research facilities - The company relies on contract manufacturers, CROs, and strategic collaborations (Pharmsynthez/SynBio, Serum Institute, Takeda) for pipeline development, as it lacks in-house research facilities[47](index=47&type=chunk)[49](index=49&type=chunk) - Xenetic expects to collect milestone payments and royalties from collaborations if drugs are successfully developed and marketed, though no near-term milestone or royalty payments are anticipated, except for ongoing royalties from Takeda and potential royalties from SynBio[48](index=48&type=chunk) [Our Drug Candidate Pipeline](index=12&type=section&id=Our%20Drug%20Candidate%20Pipeline) The company's pipeline includes XCART for B-cell Non-Hodgkin lymphomas and ErepoXen, a PolyXen platform drug, with collaborators advancing its clinical development in various territories - XCART is a personalized CAR T cell platform targeting patient-specific tumor neoantigens, with initial focus on B-cell Non-Hodgkin lymphomas, an estimated **$5 billion+** annual global market opportunity[50](index=50&type=chunk)[51](index=51&type=chunk) - ErepoXen (polysialylated erythropoietin, PSA-EPO) uses the PolyXen platform for anemia in CKD patients, designed to extend half-life. Clinical development is not pursued internally, but out-license opportunities are entertained[52](index=52&type=chunk) - SynBio received positive Phase II(b)/III clinical trial data for ErepoXen (Epolong) in Russia in December 2020 and filed for registration, expecting production by Q1 2022[54](index=54&type=chunk) - Serum Institute completed Phase I and Phase II safety trials for ErepoXen in **95 human subjects** with no significant drug-related adverse events, and may leverage SynBio's data for a Phase III waiver in India[55](index=55&type=chunk)[56](index=56&type=chunk) - Collaborators' preclinical and clinical data from licensed territories can be utilized by Xenetic for decision-making regarding development and commercialization in major markets, particularly for PolyXen in orphan oncology indications[57](index=57&type=chunk) [Significant Collaborations and Strategic Arrangements](index=14&type=section&id=Significant%20Collaborations%20and%20Strategic%20Arrangements) Xenetic maintains key collaborations with Takeda, Pharmsynthez (SynBio), and Serum Institute, involving licensing agreements, research funding, and royalty payments for its technology platforms - Takeda has an exclusive research, development, and license agreement for polysialylated blood coagulation factors using PolyXen technology. Takeda terminated SHP656 development in 2017 but commenced a new, undisclosed internal project[58](index=58&type=chunk)[59](index=59&type=chunk) - Under a 2017 Sublicense Agreement, Takeda paid Xenetic a one-time **$7.5 million** and agreed to single-digit royalty payments on net sales of Covered Products, which commenced in late 2019[60](index=60&type=chunk) - SynBio (a Pharmsynthez subsidiary) has an exclusive license to develop and commercialize drug candidates using Xenetic's PolyXen, OncoHist, and ImuXen platforms in Russia and CIS, with Xenetic retaining rights to use generated preclinical/clinical data outside these markets[61](index=61&type=chunk)[65](index=65&type=chunk) - Pharmsynthez has a collaborative R&D license for six drug candidates based on PolyXen and ImuXen in Russia/CIS, with Xenetic having rights to use preclinical/clinical data outside these regions[66](index=66&type=chunk)[68](index=68&type=chunk) - Pharmsynthez (directly and indirectly through SynBio) held approximately **5.1%** of Xenetic's outstanding Common Stock as of December 31, 2020, and also holds preferred stock and warrants[69](index=69&type=chunk) - In June 2020, Xenetic and Pharmsynthez entered into an MSA and Work Order to advance XCART development for B-cell malignancies, superseding a prior SRA[70](index=70&type=chunk) - A **$500,000** loan agreement with Pharmsynthez from Q4 2019 was extended to January 2022, with specific repayment terms for principal and interest[72](index=72&type=chunk) - Serum Institute has an exclusive license to use PolyXen technology for PSA-EPO development in certain territories, responsible for all preclinical and clinical trials at its own expense, with royalty payments based on net sales[73](index=73&type=chunk) [Our Intellectual Property](index=16&type=section&id=Our%20Intellectual%20Property) Xenetic protects its proprietary technology through patents, trade secrets, and know-how, focusing on major pharmaceutical markets globally - Xenetic protects its proprietary technology through patents, trade secrets, and know-how, with a focus on major pharmaceutical markets globally[74](index=74&type=chunk)[77](index=77&type=chunk) - As of February 3, 2021, the company directly or indirectly owns over **170 U.S. and international patents** and pending applications covering XCART, PolyXen, and other product candidates[78](index=78&type=chunk) - Issued patents generally provide **20 years** of exclusionary rights from the earliest filing date, with potential for up to **five years** of patent term extension in the U.S. for FDA-approved products[81](index=81&type=chunk) [Manufacturing and Supply](index=18&type=section&id=Manufacturing%20and%20Supply) Xenetic relies entirely on third-party manufacturers for its drug candidates, including Serum Institute for PolyXen products, and plans to seek a third-party for XCART clinical supply - Xenetic does not have internal manufacturing capabilities and relies on third-party manufacturers, including Serum Institute for PolyXen technology products[87](index=87&type=chunk) - The company anticipates seeking a third-party manufacturer for its XCART technology clinical supply needs[87](index=87&type=chunk) [Government Regulation](index=18&type=section&id=Government%20Regulation) Drug and biologic development, testing, manufacturing, and marketing are extensively regulated by government authorities in the U.S. and other countries, involving rigorous processes and ongoing compliance - Drug and biologic development, testing, manufacturing, and marketing are extensively regulated by government authorities in the U.S. and other countries[88](index=88&type=chunk)[89](index=89&type=chunk) - The U.S. drug development process involves preclinical testing, IND submission, three phases of human clinical trials (Phase 1, 2, 3), NDA/BLA submission, FDA inspection of manufacturing facilities (cGMP), and FDA review and approval[90](index=90&type=chunk)[91](index=91&type=chunk)[96](index=96&type=chunk) - The Orphan Drug Act provides incentives and a **seven-year** exclusive marketing period in the U.S. for drugs treating rare diseases, with similar provisions in the European Union (**ten years**)[102](index=102&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - Expedited development and review programs (Fast Track, Priority Review, Accelerated Approval, Breakthrough Therapy Designation) are available for drugs treating serious conditions with unmet medical needs or substantial improvement potential[105](index=105&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) - Post-approval, products remain subject to ongoing regulatory requirements, including manufacturing compliance (cGMP), labeling, advertising, and post-marketing studies[109](index=109&type=chunk) - U.S. patents may be eligible for up to **five years** of patent term extension under the Hatch-Waxman Amendments, and new chemical entities can receive **five years** of non-patent marketing exclusivity[111](index=111&type=chunk)[112](index=112&type=chunk) - Sales and reimbursement of approved products depend on coverage by third-party payors (government, commercial insurance), which are increasingly challenging prices and imposing cost controls[127](index=127&type=chunk) [Environmental Regulation](index=29&type=section&id=Environmental%20Regulation) The company's environmental compliance costs are minimal due to its reliance on unaffiliated manufacturers for drug candidate production - The company's environmental compliance costs are minimal as it does not manufacture its own drug candidates, relying on unaffiliated manufacturers[133](index=133&type=chunk) [Employees](index=29&type=section&id=Employees) As of December 31, 2020, Xenetic employed four full-time employees and supplements its workforce with external specialists and consultants for various functions - As of December 31, 2020, Xenetic employed **four full-time employees** and utilizes external specialists and consultants for regulatory affairs, R&D, and other functions[135](index=135&type=chunk)[136](index=136&type=chunk) [Competition](index=29&type=section&id=Competition) The pharmaceutical and biotechnology industries are highly competitive, with numerous companies and institutions developing cancer treatments and immuno-oncology technologies, including CAR T therapies - The pharmaceutical and biotechnology industries are highly competitive, with numerous companies, academic institutions, and governmental agencies developing cancer treatments and immuno-oncology technologies, including CAR T[137](index=137&type=chunk)[138](index=138&type=chunk) - For B-cell lymphomas, Xenetic faces competition from **four currently approved CAR T therapies** (Novartis' Kymriah, Gilead's Yescarta and Tecartus, Bristol Myers Squibb's Breyanzi) and over **100 CAR T products** in development[139](index=139&type=chunk)[140](index=140&type=chunk) - Competing drug delivery platforms for PSA include PEGylation, Fc-fusion, albumin-fusion, HESylation, PASylation, and CTP-fusion[142](index=142&type=chunk) [ITEM 1A – RISK FACTORS](index=31&type=section&id=ITEM%201A%20%E2%80%93%20RISK%20FACTORS) The company faces significant risks, including its history of unprofitability and need for substantial additional funding, which could dilute stockholders or force delays in product development [Risks Related to Our Financial Condition and Capital Requirements](index=31&type=section&id=Risks%20Related%20to%20Our%20Financial%20Condition%20and%20Capital%20Requirements) Xenetic has a history of unprofitability and an accumulated deficit, requiring substantial additional funding that could dilute stockholders or restrict operations - Xenetic has never been profitable, had an accumulated deficit of approximately **$176.9 million** as of December 31, 2020, and expects to incur significant operating losses for the foreseeable future[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) - The company will require substantial additional funding beyond its **$11.5 million** cash balance as of December 31, 2020, to complete clinical trials, obtain regulatory approval, and commercialize drug candidates[152](index=152&type=chunk)[153](index=153&type=chunk) - Raising additional capital may dilute existing stockholders, restrict operations through debt covenants, or require relinquishing rights to technologies or drug candidates through collaborations[154](index=154&type=chunk)[156](index=156&type=chunk)[158](index=158&type=chunk) [Risks Related to the Discovery and Development of our Pharmaceutical Products](index=33&type=section&id=Risks%20Related%20to%20the%20Discovery%20and%20Development%20of%20our%20Pharmaceutical%20Products) The business is highly dependent on the successful clinical development, regulatory approval, and commercialization of the XCART platform, facing challenges in patient enrollment, trial delays, and market acceptance - The business is substantially dependent on the successful clinical development, regulatory approval, and commercialization of the XCART platform technology[159](index=159&type=chunk) - As an early-stage company, Xenetic has no products approved for commercial sale and its ability to generate product revenues depends on successful development and commercialization of drug candidates, which is a highly speculative and risky undertaking[160](index=160&type=chunk) - Difficulty in enrolling patients in clinical studies could delay or prevent clinical trials, increasing costs and potentially terminating product development[162](index=162&type=chunk)[165](index=165&type=chunk) - Substantial delays in clinical trials or failure to demonstrate safety and efficacy could prevent timely commercialization of drug candidates[166](index=166&type=chunk)[167](index=167&type=chunk) - Clinical trials may fail to demonstrate safety and efficacy, leading to additional testing, delays, or denial of regulatory approval, harming the business and stock price[171](index=171&type=chunk)[172](index=172&type=chunk) - Even if regulatory approval is obtained, it may be for a narrower indication than expected, or the drug candidate will remain subject to ongoing regulatory scrutiny and post-approval requirements[176](index=176&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk) - Commercial success depends on market acceptance by physicians, patients, and third-party payors, which is uncertain and influenced by factors like efficacy, safety, pricing, and reimbursement[183](index=183&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) - Failure to obtain or maintain adequate coverage and reimbursement for approved drug candidates could limit marketability and revenue generation[188](index=188&type=chunk)[191](index=191&type=chunk)[193](index=193&type=chunk) - The company may fail to obtain orphan drug designations or maintain associated benefits, and market opportunities for drug candidates may be limited to specific patient populations or later-stage therapies[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) - Healthcare legislative reform measures, such as the Affordable Care Act and subsequent changes, may adversely affect the company's ability to sell drug candidates profitably[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) [Risks Related to Our Reliance on Third-Parties](index=42&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Third-Parties) The company's reliance on third-party collaborators, CROs, and manufacturers for development, clinical studies, and production exposes it to risks of conflicts, unsatisfactory performance, and intellectual property misappropriation - Conflicts with collaborators or strategic partners may arise, leading to actions in their self-interest, potentially limiting Xenetic's ability to implement its strategies or causing delays/termination of product development[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk) - Reliance on third-parties (CROs, clinical investigators) to conduct clinical studies poses risks if they perform unsatisfactorily, fail to comply with regulations (GCPs), or do not recruit sufficient patients, leading to delays or termination[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk) - Collaborators may adopt alternative technologies, shift resources, or fail to develop commercially viable products, negatively impacting revenues and development strategy[211](index=211&type=chunk) - Inability to establish additional collaborations on commercially reasonable terms could force the company to alter development and commercialization plans, or increase expenditures[212](index=212&type=chunk)[213](index=213&type=chunk)[215](index=215&type=chunk) - Entering collaborations may require relinquishing important rights or control over drug candidates, or being subject to unfavorable terms[217](index=217&type=chunk) - The company has no internal manufacturing, sales, marketing, or distribution capabilities and relies on third-party manufacturers, which are subject to significant regulation (cGMP) and capacity limitations[218](index=218&type=chunk)[223](index=223&type=chunk) - Reliance on third-parties necessitates sharing trade secrets, increasing the risk of discovery by competitors or misappropriation/disclosure[227](index=227&type=chunk)[228](index=228&type=chunk) [Risks Related to Our Intellectual Property](index=47&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) Failure to adequately protect or enforce intellectual property rights, including patents and trade secrets, could significantly damage commercial prospects and lead to costly litigation or loss of critical license rights - Failure to adequately protect or enforce intellectual property rights (patents, proprietary formulations, trademarks) could significantly damage commercial prospects, as patents may be challenged, invalidated, or circumvented[229](index=229&type=chunk)[230](index=230&type=chunk) - Patent applications may not be issued or may have reduced coverage, and the company may not be the first inventor or filer, impacting licensing and royalty potential[231](index=231&type=chunk) - Issued patents covering drug candidates could be found invalid or unenforceable if challenged in court or administrative bodies, leading to loss of patent protection[234](index=234&type=chunk) - Protecting intellectual property rights globally is expensive and challenging, as foreign laws may offer less protection, allowing competitors to use inventions in other jurisdictions[235](index=235&type=chunk)[236](index=236&type=chunk) - Infringement on the intellectual property rights of others could lead to substantial costs, litigation, or the inability to develop/commercialize infringing technology[238](index=238&type=chunk) - Failure to comply with obligations in license agreements with third-parties could result in loss of critical license rights[239](index=239&type=chunk) - Lawsuits to protect or enforce patents are expensive, time-consuming, and may be unsuccessful, potentially invalidating patents or narrowly interpreting claims[244](index=244&type=chunk)[245](index=245&type=chunk) - Changes in U.S. patent law (e.g., Leahy-Smith America Invents Act, Supreme Court rulings) could diminish the value of patents and weaken the ability to obtain or enforce them[248](index=248&type=chunk)[249](index=249&type=chunk) - Claims that employees or consultants wrongfully used or disclosed confidential information or trade secrets of third-parties could lead to litigation, loss of IP rights, or personnel[250](index=250&type=chunk)[251](index=251&type=chunk) - Inability to protect confidential information and trade secrets, despite non-disclosure agreements, would harm the company's competitive position[252](index=252&type=chunk) [Risks Related to Our Business Operations](index=52&type=section&id=Risks%20Related%20to%20Our%20Business%20Operations) The company operates in a highly competitive environment, faces challenges in retaining key personnel, and may be impacted by new accounting standards, organizational expansion, or collaboration disputes - The company operates in an extremely competitive environment, facing numerous pharmaceutical and biotechnology companies with greater resources and experience, which could render its products obsolete[254](index=254&type=chunk) - Future success depends on retaining key executive team members, consultants, and advisors, and attracting qualified personnel in a competitive market[255](index=255&type=chunk) - Potential new accounting standards or legislative actions may adversely impact future financial position or results of operations, requiring additional expenses for compliance[256](index=256&type=chunk)[257](index=257&type=chunk) - Expansion of the organization may lead to difficulties in managing growth, diverting management attention and potentially disrupting operations[258](index=258&type=chunk) - Collaboration agreements contain complex commercial terms that could result in disputes, litigation, or indemnification liability, adversely affecting business and financial condition[259](index=259&type=chunk)[260](index=260&type=chunk) [Risks Related to Our Common Stock](index=54&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) The market for the company's Common Stock may lack liquidity and experience high volatility, while future stock issuances could dilute existing stockholders and anti-takeover provisions may depress stock price - An active, liquid, and orderly market for the company's Common Stock or Purchase Warrants may not develop or be sustained, making it difficult for investors to sell securities[262](index=262&type=chunk) - The market price of the company's securities may be highly volatile due to various factors, including clinical trial results, funding issues, regulatory decisions, competition, and economic conditions[263](index=263&type=chunk)[264](index=264&type=chunk) - Preferred stock has preferential rights (e.g., liquidation preference, conversion rights) over common stockholders, which could reduce common stock value or cause dilution[266](index=266&type=chunk) - Future issuance of Common Stock, including the **50,000,000 authorized shares**, may result in dilution to existing stockholders and depress the market price[267](index=267&type=chunk)[268](index=268&type=chunk) - The company does not intend to pay dividends on its Common Stock or Preferred Stock, limiting returns to stock appreciation[270](index=270&type=chunk) - Certain provisions in the Articles of Incorporation, Bylaws, and Nevada Revised Statutes may have an anti-takeover effect, potentially causing the common stock price to decline[272](index=272&type=chunk) - Past failures to satisfy Nasdaq listing requirements and potential future non-compliance could affect the market price and liquidity of Common Stock, and reduce the ability to raise capital[273](index=273&type=chunk) [General Risk Factors](index=56&type=section&id=General%20Risk%20Factors) General risks include the uncertain impact of the COVID-19 pandemic, limitations on NOL carryforwards, potential price controls, misconduct by personnel, product liability claims, and cybersecurity failures - The COVID-19 pandemic has created significant volatility and uncertainty, and its ultimate impact on the company's business, operations, and financial results is uncertain and could be materially adverse[274](index=274&type=chunk)[275](index=275&type=chunk) - The use of potential future operating losses and federal/state NOL carryforwards to offset taxable income could be limited by ownership changes or tax law reforms (e.g., TCJA), potentially leading to income tax liabilities despite existing NOLs[277](index=277&type=chunk)[278](index=278&type=chunk)[279](index=279&type=chunk) - Governments may impose price controls on pharmaceutical products, particularly in foreign jurisdictions, which could adversely affect future profitability and ability to achieve or sustain profitability[281](index=281&type=chunk) - Potential misconduct by employees, principal investigators, consultants, and commercial partners, including non-compliance with regulatory standards or fraud, could result in regulatory sanctions, reputational harm, or significant fines[282](index=282&type=chunk) - The use of drug candidates in clinical studies and commercial sale exposes the company to product liability claims, which could result in substantial liability, costs, and damage to business reputation[283](index=283&type=chunk)[284](index=284&type=chunk) - Failure to comply with environmental, health, and safety laws and regulations could lead to fines, penalties, or significant costs[285](index=285&type=chunk)[286](index=286&type=chunk) - Non-cash charges like share-based payments may materially impact results of operations[287](index=287&type=chunk) - Varying interpretations of accounting standards could lead to restatement of previously reported results[289](index=289&type=chunk) - Failures in information technology systems, including cybersecurity attacks, could disrupt operations, lead to data misappropriation, and result in reputational damage or regulatory fines[291](index=291&type=chunk)[292](index=292&type=chunk) - As a smaller reporting company (SRC), reduced reporting requirements may make its Common Stock less attractive to investors, potentially leading to a less active trading market and increased stock price volatility[293](index=293&type=chunk) [ITEM 1B – UNRESOLVED STAFF COMMENTS](index=60&type=section&id=ITEM%201B%20%E2%80%93%20UNRESOLVED%20STAFF%20COMMENTS) The company has no unresolved staff comments from the SEC [ITEM 2 – PROPERTIES](index=60&type=section&id=ITEM%202%20%E2%80%93%20PROPERTIES) Xenetic Biosciences occupies approximately 1,700 square feet of office space in Framingham, Massachusetts, under a lease through September 2022, and leases 360 square feet of office space in Miami, Florida, extended through November 2021 - The company leases approximately **1,700 square feet** of office space in Framingham, Massachusetts, with a lease term through September 2022[296](index=296&type=chunk) - An additional **360 square feet** of office space is leased in Miami, Florida, with the lease extended through November 30, 2021[297](index=297&type=chunk) [ITEM 3 – LEGAL PROCEEDINGS](index=60&type=section&id=ITEM%203%20%E2%80%93%20LEGAL%20PROCEEDINGS) As of December 31, 2020, Xenetic Biosciences was not a party to any legal proceedings that management believes would have a material adverse effect on its financial position, results of operations, or cash flows - As of December 31, 2020, there were no legal matters that management believed would have a material adverse effect on the company's financial position, results of operations, or cash flows[299](index=299&type=chunk) [ITEM 4 – MINE SAFETY DISCLOSURES](index=60&type=section&id=ITEM%204%20%E2%80%93%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to Xenetic Biosciences, Inc PART II [ITEM 5 – MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=61&type=section&id=ITEM%205%20%E2%80%93%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Xenetic Biosciences' Common Stock is listed on The NASDAQ Capital Market under the symbol "XBIO," with 425 holders of record as of March 11, 2021, and the company has never paid cash dividends, prioritizing earnings for business development - Common Stock is listed on The NASDAQ Capital Market under the symbol "XBIO"[303](index=303&type=chunk) - As of March 11, 2021, there were **425 holders** of record of the Common Stock[303](index=303&type=chunk) - The company has never declared or paid cash dividends on its Common Stock and does not intend to in the foreseeable future, planning to retain earnings for business development[304](index=304&type=chunk)[270](index=270&type=chunk) - No repurchases of equity securities were made during the quarter ended December 31, 2020[307](index=307&type=chunk) [ITEM 6 – SELECTED FINANCIAL DATA](index=61&type=section&id=ITEM%206%20%E2%80%93%20SELECTED%20FINANCIAL%20DATA) As a smaller reporting company, Xenetic Biosciences is not required to provide selected financial data under this item [ITEM 7 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=61&type=section&id=ITEM%207%20%E2%80%93%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Xenetic Biosciences, a biopharmaceutical company focused on XCART technology, reported a net loss of $10.9 million in 2020, an improvement from $12.8 million in 2019, driven by increased Takeda royalties and decreased R&D and G&A expenses, partly offset by a substantial asset impairment charge related to IPR&D [BUSINESS OVERVIEW](index=61&type=section&id=BUSINESS%20OVERVIEW) Xenetic Biosciences is a biopharmaceutical company focused on its XCART platform for B-cell lymphomas and leveraging its PolyXen drug delivery platform, with drug candidates in development and ongoing royalties from a PolyXen license - Xenetic Biosciences is a biopharmaceutical company focused on XCART, a personalized CAR T platform technology for B-cell lymphomas, and leveraging its PolyXen drug delivery platform[309](index=309&type=chunk)[310](index=310&type=chunk) - The company's drug candidates are in development, with no regulatory marketing authorization to date, but it receives ongoing royalties from a PolyXen license[311](index=311&type=chunk) - Development of XBIO-101 for endometrial cancer has been suspended since March 2019[312](index=312&type=chunk) - In 2020, internal development efforts focused on winding down XBIO-101 and preliminary XCART development[313](index=313&type=chunk) [Critical Accounting Estimates](index=62&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates involve revenue recognition for license and collaboration arrangements, expensing research and development costs, valuing share-based compensation and warrants, and annually testing goodwill and indefinite-lived intangible assets for impairment - Revenue recognition for license and collaboration arrangements involves significant judgment in identifying performance obligations, determining transaction price, and allocating it based on stand-alone selling prices, with upfront payments recognized ratably over the expected performance period[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk) - Royalty revenue is recognized in the period of sale upon receipt of reports from third-parties, provided sales are reliably measurable and no remaining performance obligations exist[323](index=323&type=chunk) - Research and development expenses are expensed as incurred, including upfront non-refundable payments and the value of acquired in-process R&D (IPR&D) that does not meet capitalization criteria[324](index=324&type=chunk) - Accrued R&D expenses are estimated based on open contracts, services performed, and communication with personnel, with periodic adjustments[325](index=325&type=chunk) - Share-based expense for options and RSUs is calculated using the Black-Scholes model, requiring judgment for volatility and expected terms. Common stock awards to non-employees are valued based on services provided[328](index=328&type=chunk)[330](index=330&type=chunk) - Warrants are classified as equity awards and measured at fair value using the Black-Scholes model, with expense recognized over the service period or at issuance[331](index=331&type=chunk)[332](index=332&type=chunk) - Goodwill and indefinite-lived intangible assets (IPR&D) are not amortized but tested annually for impairment using qualitative or quantitative analysis (income and market valuation methods)[335](index=335&type=chunk)[336](index=336&type=chunk) - In 2019, a **$3.3 million** asset impairment charge was recorded for Goodwill due to a significant decline in market capitalization. In 2020, a **$9.2 million** asset impairment charge was recorded for IPR&D (OncoHist) due to management's decision to indefinitely delay further development and failure to sell/license[337](index=337&type=chunk)[338](index=338&type=chunk) [Effects of the COVID-19 Pandemic](index=67&type=section&id=Effects%20of%20the%20COVID-19%20Pandemic) The COVID-19 pandemic has created significant economic uncertainties, but the company's operations were not materially affected during 2020, though the ultimate impact on future results remains uncertain - The COVID-19 pandemic has created significant economic uncertainties, but the company's operations were not materially affected during 2020. The ultimate impact on future results remains uncertain[341](index=341&type=chunk) [Results of Operations](index=67&type=section&id=Results%20of%20Operations) In 2020, the company reported a reduced net loss compared to 2019, driven by significantly increased royalty revenue and decreased R&D and G&A expenses, despite higher asset impairment charges Consolidated Statements of Comprehensive Loss Summary | Description | 2020 ($) | 2019 ($) | Increase (Decrease) ($) | Percentage Change (%) | | :---------------------------------- | :--------- | :--------- | :---------------------- | :-------------------- | | Royalty revenue | 436,942 | 17,066 | 419,876 | 2,460.3% | | Research and development | (1,731,406) | (4,889,340) | (3,157,934) | (64.6)% | | General and administrative | (3,400,071) | (4,731,176) | (1,331,105) | (28.1)% | | Asset impairment charges | (9,243,128) | (3,283,379) | 5,959,749 | 181.5% | | Total operating costs and expenses | (14,374,605) | (12,903,895) | 1,470,710 | 11.4% | | Loss from operations | (13,937,663) | (12,886,829) | 1,050,834 | 8.2% | | Other income (expense) | (492) | 3,315 | (3,807) | (114.8)% | | Interest income, net | 126,171 | 108,489 | 17,682 | 16.3% | | Loss before income taxes | (13,811,984) | (12,775,025) | 1,036,959 | 8.1% | | Income tax benefit | 2,918,518 | – | 2,918,518 | 100.0% | | Net loss | (10,893,466) | (12,775,025) | (1,881,559) | (14.7)% | | Basic and diluted loss per share | (1.70) | (6.33) | | | | Weighted-average shares outstanding | 6,392,381 | 2,852,464 | | | - Royalty revenue increased by **$0.4 million (2,460.3%)** to **$0.4 million** in 2020, representing a full year of royalties from the Takeda sublicense agreement, compared to three months in 2019[344](index=344&type=chunk) - Total R&D expenses decreased by **$3.2 million (64.6%)** to **$1.7 million** in 2020, primarily due to a **$3.0 million** IPR&D expense in 2019 not recurring in 2020. Excluding this, R&D decreased by **$127,000 (6.8%)**[345](index=345&type=chunk) Research and Development Expenses by Category | Category of Expense | 2020 ($) | 2019 ($) | | :----------------------------------- | :--------- | :--------- | | IPR&D expense | – | 3,031,226 | | Outside services and CROs | 1,203,582 | 1,357,820 | | Share-based expense | 49,191 | 156,964 | | Personnel costs | 342,883 | 297,651 | | Other | 135,750 | 45,679 | | **Total R&D expense** | **1,731,406** | **4,889,340** | - Decrease in outside services and CROs was due to reduced spending on the XBIO-101 trial, partially offset by increased XCART preclinical development costs[347](index=347&type=chunk) - General and administrative expenses decreased by **$1.3 million (28.1%)** to **$3.4 million** in 2020, mainly due to **$1.1 million** in XCART acquisition transaction costs in 2019 not recurring[348](index=348&type=chunk) - Asset impairment charges increased to **$9.2 million** in 2020 (related to IPR&D) from **$3.3 million** in 2019 (related to Goodwill)[350](index=350&type=chunk) - An income tax benefit of **$2.9 million** was recognized in 2020 due to the IPR&D impairment, with no similar benefit in 2019[353](index=353&type=chunk) [Liquidity and Capital Resources](index=69&type=section&id=Liquidity%20and%20Capital%20Resources) The company incurred a net loss of $10.9 million in 2020, increasing its accumulated deficit to $176.9 million, with existing resources expected to fund operations through Q1 2022, but additional capital will be needed long-term - The company incurred a net loss of **$10.9 million** in 2020 and had an accumulated deficit of **$176.9 million** as of December 31, 2020[355](index=355&type=chunk) - Working capital increased by **$1.8 million** to **$11.4 million** in 2020, primarily due to **$5.4 million** in net proceeds from a December 2020 registered direct Common Stock offering, offset by the net loss[355](index=355&type=chunk) - Cash balance was **$11.5 million** at December 31, 2020, compared to **$10.4 million** at December 31, 2019[357](index=357&type=chunk) - Management believes existing resources and the December 2020 financing will fund operations through Q1 2022, but additional capital will be needed long-term[358](index=358&type=chunk) - Cash flows used in operating activities were **$4.3 million** in 2020, an improvement from **$6.4 million** in 2019[359](index=359&type=chunk) - Cash flows from financing activities totaled **$5.4 million** in 2020 (from the registered direct offering), compared to **$16.1 million** in 2019 (from two stock offerings)[361](index=361&type=chunk) - The company has no off-balance sheet arrangements with a material effect on its financial condition[362](index=362&type=chunk) [Contractual Obligations](index=71&type=section&id=Contractual%20Obligations) The company's contractual obligations primarily consist of property leases for office space, excluding variable and cancelable payments for CRO services Contractual Obligations as of December 31, 2020 | | Total ($) | Less than 1 year ($) | 1-3 years ($) | 3-5 years ($) | More than 5 years ($) | | :---------------- | :-------- | :------------------- | :------------ | :------------ | :-------------------- | | Lease obligations | 83,649 | 54,532 | 29,117 | – | – | - Contractual obligations primarily consist of property leases for office space, excluding potential payments for CRO services due to variable timing and cancelability[364](index=364&type=chunk) [ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=71&type=section&id=ITEM%207A%20%E2%80%93%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Xenetic Biosciences is not required to provide quantitative and qualitative disclosures about market risk ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA [Report of Independent Registered Public Accounting Firm](index=73&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Marcum LLP issued an unqualified opinion on Xenetic Biosciences' consolidated financial statements for 2020 and 2019, with critical audit matters including the company's going concern assessment and revenue recognition for royalty income - Marcum LLP issued an unqualified opinion on the consolidated financial statements for the years ended December 31, 2020 and 2019[373](index=373&type=chunk) - Critical audit matters included the company's going concern assessment, requiring high auditor judgment to assess the reasonableness of cash flow forecasts and assumptions[378](index=378&type=chunk)[379](index=379&type=chunk) - Another critical audit matter was revenue recognition over royalty revenue, specifically management's estimate of potential net sales as expected variable consideration[381](index=381&type=chunk)[382](index=382&type=chunk) [Consolidated Balance Sheets](index=75&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2020, total assets decreased to $13.18 million from $21.55 million in 2019, primarily due to asset impairments, while cash increased to $11.53 million, and total liabilities and stockholders' equity also decreased Consolidated Balance Sheet Summary | ASSETS | Dec 31, 2020 ($) | Dec 31, 2019 ($) | | :---------------------------------- | :--------------- | :--------------- | | Cash | 11,527,552 | 10,367,920 | | Total current assets | 12,369,510 | 11,089,999 | | Property and equipment, net | – | 757 | | Goodwill and indefinite-lived intangible assets | – | 9,243,128 | | Other assets | 809,985 | 1,213,042 | | **Total assets** | **13,179,495** | **21,546,926** | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | 936,928 | 1,415,157 | | Deferred tax liability and other long-term liabilities | 27,043 | 2,918,518 | | **Total liabilities** | **963,971** | **4,333,675** | | Total stockholders' equity | 12,215,524 | 17,213,251 | | **Total liabilities and stockholders' equity** | **13,179,495** | **21,546,926** | - Goodwill and indefinite-lived intangible assets decreased from **$9.24 million** in 2019 to **$0** in 2020 due to impairment charges[386](index=386&type=chunk) - Deferred tax liability decreased significantly from **$2.92 million** in 2019 to **$27,043** in 2020[386](index=386&type=chunk) [Consolidated Statements of Comprehensive Loss](index=76&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) Xenetic Biosciences reported a net loss of $10.89 million for the year ended December 31, 2020, an improvement from a $12.78 million net loss in 2019, driven by increased royalty revenue and decreased operating expenses, despite higher asset impairment charges Consolidated Statements of Comprehensive Loss Summary | Description | 2020 ($) | 2019 ($) | | :---------------------------------- | :--------- | :--------- | | Royalty revenue | 436,942 | 17,066 | | Total revenue | 436,942 | 17,066 | | Research and development | (1,731,406) | (4,889,340) | | General and administrative | (3,400,071) | (4,731,176) | | Asset impairment charges | (9,243,128) | (3,283,379) | | Total operating costs and expenses | (14,374,605) | (12,903,895) | | Loss from operations | (13,937,663) | (12,886,829) | | Other income (expense) | (492) | 3,315 | | Interest income, net | 126,171 | 108,489 | | Total other income | 125,679 | 111,804 | | Loss before income taxes | (13,811,984) | (12,775,025) | | Income tax benefit | 2,918,518 | – | | Net loss | (10,893,466) | (12,775,025) | | Net loss applicable to common stockholders | (10,893,466) | (18,059,404) | | Basic and diluted loss per share | (1.70) | (6.33) | | Weighted-average shares outstanding | 6,392,381 | 2,852,464 | - Net loss applicable to common stockholders improved from **$(18.06) million** in 2019 to **$(10.89) million** in 2020, partly due to a deemed dividend related to Series B Preferred Stock in 2019[388](index=388&type=chunk)[513](index=513&type=chunk) [Consolidated Statements of Stockholders' Equity](index=77&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity decreased from $17.21 million in 2019 to $12.22 million in 2020, primarily due to the net loss of $10.89 million, partially offset by $5.43 million in net proceeds from the December 2020 common stock offering, which also significantly increased common stock shares outstanding Consolidated Statements of Stockholders' Equity Summary | Description | Dec 31, 2020 ($) | Dec 31, 2019 ($) | | :----------------------------------- | :--------------- | :--------------- | | Preferred Stock (Par Value) | 2,774 | 2,774 | | Common Stock (Par Value) | 8,771 | 6,092 | | Additional Paid in Capital | 194,133,511 | 188,240,451 | | Accumulated Deficit | (176,902,086) | (166,008,620) | | Accumulated Other Comprehensive Income | 253,734 | 253,734 | | Treasury Stock | (5,281,180) | (5,281,180) | | **Total Stockholders' Equity** | **12,215,524** | **17,213,251** | - Net proceeds from the December 2020 registered direct offering contributed **$5.43 million** to additional paid-in capital[391](index=391&type=chunk) - The accumulated deficit increased by **$10.89 million** in 2020[391](index=391&type=chunk) [Consolidated Statements of Cash Flows](index=78&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash used in operating activities decreased to $4.27 million in 2020 from $6.40 million in 2019, primarily due to non-cash adjustments, while cash provided by financing activities decreased to $5.43 million from $16.13 million Consolidated Statements of Cash Flows Summary | Cash Flow Activity | 2020 ($) | 2019 ($) | | :----------------------------------- | :--------- | :--------- | | Net cash used in operating activities | (4,267,193) | (6,399,404) | | Net cash provided by investing activities | – | 2,000 | | Net cash provided by financing activities | 5,426,825 | 16,127,209 | | Net change in cash | 1,159,632 | 9,729,805 | | Cash at end of period | 11,527,552 | 10,367,920 | - Cash used in operating activities in 2020 was primarily due to net loss, offset by non-cash charges for asset impairment, deferred income taxes, and share-based expense[359](index=359&type=chunk) - Financing activities in 2020 were driven by **$5.43 million** in net proceeds from the December 2020 registered direct Common Stock offering[361](index=361&type=chunk) [Notes to Consolidated Financial Statements](index=79&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed information on the company's background, going concern status, and the impact of COVID-19, outlining significant accounting policies, key collaborations, and specifics on the XCART acquisition, stockholders' equity, income tax positions, commitments, contingent liabilities, and related party transactions [1. The Company](index=79&type=section&id=1.%20The%20Company) Xenetic Biosciences is a biopharmaceutical company focused on its XCART platform and PolyXen drug delivery technology, facing substantial losses since inception, but management believes recent financing will fund operations through Q1 2022 - Xenetic Biosciences is a biopharmaceutical company focused on XCART, a personalized CAR T platform for B-cell lymphomas, and leveraging its PolyXen drug delivery platform[395](index=395&type=chunk)[396](index=396&type=chunk) - The company has incurred substantial losses since inception, raising substantial doubt about its ability to continue as a going concern. However, management believes recent financing (**$5.4 million** net proceeds from December 2020 offering) and existing resources will fund operations through Q1 2022, with additional capital needed long-term[398](index=398&type=chunk) [2. Impact of COVID-19](index=80&type=section&id=2.%20Impact%20of%20COVID-19) The COVID-19 pandemic has created significant economic uncertainties, but as of the financial statement issuance date, it has not materially impacted the company's operations - The COVID-19 pandemic has created significant economic uncertainties, but as of the financial statement issuance date, there has been no significant impact on the company's operations[400](index=400&type=chunk) [3. Summary of Significant Accounting Policies](index=80&type=section&id=3.%20Summary%20of%20Significant%20Accounting%20Policies) This section details the company's accounting policies, including a 1-for-12 reverse stock split, U.S. dollar as functional currency, revenue recognition under ASC Topic 606, expensing R&D, fair value measurement for share-based compensation and warrants, annual impairment testing for goodwill and IPR&D, income tax accounting, and lease accounting under ASU 2016-02 - The company effected a **1-for-12 reverse stock split** on June 25, 2019, retroactively adjusting all share numbers and prices[401](index=401&type=chunk) - The functional currency for foreign subsidiaries is the U.S. dollar, a change applied prospectively since 2014[405](index=405&type=chunk) - Revenue recognition follows ASC Topic 606, requiring a five-step model to identify performance obligations, determine transaction price, allocate it, and recognize revenue as obligations are satisfied[420](index=420&type=chunk) - Non-refundable upfront license payments and milestone payments with future obligations are recognized ratably over the expected performance period[423](index=423&type=chunk) - Royalty revenue is recognized in the period of sale upon reliable measurement and satisfaction of all criteria[425](index=425&type=chunk) - Research and development expenses are expensed as incurred, including upfront non-refundable payments and acquired IPR&D that does not meet capitalization criteria[427](index=427&type=chunk) - Share-based expense for options and RSUs is based on fair value using the Black-Scholes model, recognized over the vesting period. Common stock awards to non-employees are valued based on services provided[432](index=432&type=chunk)[433](index=433&type=chunk)[434](index=434&type=chunk) - Warrants are classified as equity awards and measured at fair value using the Black-Scholes model, with expense recognized over the service period[435](index=435&type=chunk) - Goodwill and IPR&D are indefinite-lived intangible assets, not amortized but tested for impairment at least annually. IPR&D is amortized upon completion or abandoned[411](index=411&type=chunk)[412](index=412&type=chunk)[415](index=415&type=chunk) - The company accounts for income taxes using the asset and liability method, with deferred tax assets and liabilities determined by temporary differences[436](index=436&type=chunk) - Leases are accounted for under ASU 2016-02 (Topic 842), requiring recognition of a right-of-use asset and lease liability for all non-short-term leases[440](index=440&type=chunk) [4. Significant Strategic Collaborations](index=88&type=section&id=4.%20Significant%20Strategic%20Collaborations) Xenetic's significant strategic collaborations include agreements with Takeda for polysialylated blood coagulation factors, Scripps Research for XCART development, Pharmsynthez (SynBio) for PolyXen and ImuXen licenses, and Serum Institute for PSA-EPO development - Takeda pays single-digit royalty payments based on net sales of Covered Products under a sublicense agreement, with **$437,000** and **$17,000** recognized as revenue in 2020 and 2019, respectively[450](index=450&type=chunk) - Xenetic agreed to provide Scripps Research up to **$3.0 million** to fund preclinical XCART development, with **$0.9 million** paid through December 31, 2020[451](index=451&type=chunk) - Pharmsynthez (and its subsidiary SynBio) holds approximately **5.1%** of Xenetic's outstanding Common Stock as of December 31, 2020, and has exclusive licenses for PolyXen and ImuXen technology in certain territories[452](index=452&type=chunk)[453](index=453&type=chunk) - A Master Services Agreement (MSA) with Pharmsynthez for XCART development, signed June 12, 2020, superseded a prior Sponsored Research Agreement (SRA). The Work Order under MSA has an estimated total cost of **$1.8 million** and potential milestone payments up to **$1,050,000**[454](index=454&type=chunk)[455](index=455&type=chunk)[456](index=456&type=chunk) - SynBio reported positive Phase 3 clinical study data for Epolong (ErepoXen) in December 2020 and filed for Russian approval, expecting production by Q1 2022[459](index=459&type=chunk) - Serum Institute has an exclusive license for PolyXen technology to develop PSA-EPO, responsible for trials in predetermined territories, with royalty payments based on net sales[460](index=460&type=chunk) [5. Acquisitions](index=90&type=section&id=5.%20Acquisitions) On March 1, 2019, Xenetic acquired the XCART technology platform from Hesperix and OPKO Pharmaceuticals LLC, accounted for as an asset acquisition with total consideration of approximately $4.1 million expensed to R&D and G&A - On March 1, 2019, Xenetic acquired the XCART technology platform from Hesperix and OPKO Pharmaceuticals LLC. The acquisition was accounted for as an asset acquisition, not a business combination[462](index=462&type=chunk)[468](index=468&type=chunk) - Total consideration for the IPR&D was approximately **$4.1 million**, including **$3.0 million** in common shares and **$1.1 million** in transaction costs, all expensed to R&D and G&A in 2019[468](index=468&type=chunk) - The acquisition involved issuing **406,246 shares** of Common Stock to Hesperix sellers, and **164,062 shares** to OPKO and **54,687 shares** to Scripps Research[463](index=463&type=chunk)[467](index=467&type=chunk) [6. Property and Equipment, net](index=91&type=section&id=6.%20Property%20and%20Equipment%2C%20net) As of December 31, 2020, the net book value of property and equipment was zero due to accumulated depreciation, with minimal depreciation expense incurred in 2020 and 2019 Property and Equipment, net | | December 31, 2020 ($) | December 31, 2019 ($) | | :-------------------------- | :-------------------- | :-------------------- | | Office and computer equipment | 42,289 | 42,289 | | Furniture and fixtures | 14,738 | 14,738 | | Property and equipment – at cost | 57,027 | 57,027 | | Less accumulated depreciation | (57,027) | (56,270) | | **Property and equipment, net** | **–** | **757** | - Depreciation expense was approximately **$1,000** in 2020 and **$4,000** in 2019[469](index=469&type=chunk) [7. Goodwill, Indefinite-Lived Intangible Assets and Other Long-Term Assets](index=91&type=section&id=7.%20Goodwill%2C%20Indefinite-Lived%20Intangible%20Assets%20and%20Other%20Long-Term%20Assets) Goodwill and the indefinite-lived intangible asset (OncoHist IPR&D) were fully impaired in 2019 and 2020, respectively, reducing their carrying values to zero, while other long-term assets include prepaid clinical PSA supply and a loan to Pharmsynthez - Goodwill was fully impaired in 2019, resulting in a **$3.3 million** asset impairment charge, reducing its carrying value to zero[470](index=470&type=chunk) - The indefinite-lived intangible asset (OncoHist IPR&D) was fully impaired in 2020, resulting in a **$9.2 million** asset impairment charge, reducing its carrying value to zero[471](index=471&type=chunk) - Other long-term assets include **$0.7 million** of prepaid clinical PSA supply from Serum Institute, classified as long-term as of December 31, 2020 and 2019[472](index=472&type=chunk) - A **$500,000** loan to Pharmsynthez (Pharmsynthez Loan) from Q4 2019, accruing **10% interest**, was extended to January 2022. Approximately **$0.1 million** was classified as long-term within Other Assets as of December 31, 2020[473](index=473&type=chunk)[474](index=474&type=chunk) [8. Accrued Expenses](index=93&type=section&id=8.%20Accrued%20Expenses) Accrued expenses increased from $463,987 in 2019 to $574,050 in 2020, primarily driven by increases in accrued payroll and benefits and professional fees Accrued Expenses | | December 31, 2020 ($) | December 31, 2019 ($) | | :-------------------------- | :-------------------- | :-------------------- | | Accrued payroll and benefits | 126,615 | 68,016 | | Accrued professional fees | 375,694 | 306,413 | | Accrued research costs | 62,607 | 80,519 | | Other | 9,134 | 9,039 | | **Total** | **574,050** | **463,987** | [9. Fair Value Measurements](index=93&type=section&id=9.%20Fair%20Value%20Measurements) The carrying amounts of the company's financial instruments approximate fair value due to their short maturities, with no financial instruments classified as Level 3 in the fair value hierarchy during 2020 and 2019 - The carrying amounts of the company's financial instruments approximate fair value due to their short maturities. No financial instruments were classified as Level 3 in the fair value hierarchy during 2020 and 2019[477](index=477&type=chunk) [10. Income Taxes](index=93&type=section&id=10.%20Income%20Taxes) A deferred tax benefit of $2.9 million was recognized in 2020 due to the reversal of a deferred tax liability related to IPR&D impairment, with significant NOL carryforwards subject to potential limitations - A deferred tax benefit of **$2.9 million** was recognized in 2020 due to the reversal of a deferred tax liability related to IPR&D impairment; no benefit was recognized in 2019[478](index=478&type=chunk) Components of Loss Before Income Taxes | | Year ended December 31, 2020 ($) | Year ended December 31, 2019 ($) | | :------------------ | :----------------------------- | :----------------------------- | | Domestic (U.S.) | (4,368,330) | (4,317,585) | | Foreign (U.K.) | (61,867) | (2,302,131) | | Foreign (Germany) | (9,357,256) | (3,389,473) | | Foreign (Switzerland) | (24,531) | (2,765,836) | | **Loss before income taxes** | **(13,811,984)** | **(12,775,025)** | Reconciliation of Income Tax Benefit | | Year ended December 31, 2020 ($) | Year ended December 31, 2019 ($) | | :----------------------------------- | :----------------------------- | :----------------------------- | | Federal | (2,900,517) | (2,682,755) | | State | (230,238) | (284,724) | | Change in valuation allowance | 3,089,617 | 1,878,033 | | Permanent differences, net | 1,399 | 1,323 | | Goodwill impairment | – | 689,510 | | Foreign rate differential | (985,231) | 381,190 | | Share-based payments, net | 22,267 | 11,084 | | Enhanced research and development tax credits | (56,564) | (54,148) | | Rate change | (2,015,683) | – | | Other items | 156,432 | 60,487 | | **Net benefit for income taxes** | **(2,918,518)** | **–** | Deferred Tax Assets and Liabilities | | December 31, 2020 ($) | December 31, 2019 ($) | | :----------------------------------- | :-------------------- | :-------------------- | | U.K. net operating loss carryforwards | 10,733,568 | 8,984,851 | | U.S. federal net operating loss carryforwards | 4,671,789 | 3,857,973 | | Total deferred tax assets before valuation allowance | 29,661,323 | 25,878,322 | | Valuation allowance for deferred tax assets | (29,644,241) | (25,872,847) | | Net deferred tax assets | 17,082 | 5,475 | | Indefinite-lived intangible asset (Deferred tax liabilities) | – | (2,918,518) | | **Net deferred liability** | **–** | **(2,918,518)** | - The company has significant NOL carryforwards in the U.K. (**$56.5 million**), U.S. federal (**$22.2 million**), U.S. state (**$22.3 million**), Germany (**$2.0 million**), and Switzerland (**$0.9 million**)[481](index=481&type=chunk) - A full valuation allowance has been provided on deferred tax assets, as their realization is not considered more likely than not[478](index=478&type=chunk) - The ability to use NOLs and tax credits is subject to limitations under Section 382 of the U.S. Internal Revenue Code and similar foreign legislation due to potential ownership changes[482](index=482&type=chunk)[483](index=483&type=chunk)[484](index=484&type=chunk)[487](index=487&type=chunk) [11. Stockholders' Equity](index=96&type=section&id=11.%20Stockholders%27%20Equity) In 2020, the company completed a registered direct offering of Common Stock, increasing authorized shares to 50,000,000, while also detailing the terms of various preferred stock series and outstanding warrants - On December 10, 2020, the company completed a registered direct offering of **2,448,980 Common Stock shares** at **$2.45 per share**, yielding **$5.4 million** in net proceeds[492](index=492&type=chunk) - On December 4, 2020, authorized Common Stock shares were increased to **50,000,000**[493](index=493&type=chunk) - In July 2019, a public offering of Common Stock, Prefunded Warrants, and Purchase Warrants generated approximately **$13.4 million** in net proceeds[495](index=495&type=chunk) - Purchase Warrants from the July 2019 offering are exercisable at **$13.00 per share** and expire **five years** from issuance. Approximately **0.2 million** and **2.2 million** were exercised on a cashless basis in 2020 and 2019, respectively[496](index=496&type=chunk) - Series A Preferred Stock holders are entitled to a liquidation preference and a **5% non-cumulative cash dividend**, convertible into Common Stock at a **12-for-1 ratio**[502](index=502&type=chunk)[503](index=503&type=chunk)[504](index=504&type=chunk) - Series B Preferred Stock holders have a senior liquidation preference and are convertible into Common Stock at a **1-for-1.63 ratio**, subject to an issuable maximum and full ratchet anti-dilution protection[508](index=508&type=chunk)[509](index=509&type=chunk)[510](index=510&type=chunk)[511](index=511&type=chunk) - The 2019 stock offerings triggered a down-round provision in Series B Preferred Stock, resulting in a **$5.3 million** deemed dividend increasing net loss attributable to common shareholders in 2019[513](index=513&type=chunk) - As of December 31, 2020, **30,307 collaboration and consulting warrants** were outstanding, with an average weighted exercise price of **$124.74** and expiration dates ranging from April to May 2021[514](index=514&type=chunk)[520](index=520&type=chunk) - Approximately **29,000 Purchase Warrants** from the July 2019 offering were outstanding as of December 31, 2020[521](index=521&type=chunk) - As of December 31, 2020, **212,185 debt and equity financing warrants** were outstanding, with a weighted average exercise price of **$50.20** and expiration dates ranging from March to November 2021[524](index=524&type=chunk) [12. Share-Based Expense](index=101&type=section&id=12.%20Share-Based%20Expense) Total share-based expense decreased from $0.9 million in 2019 to $0.5 million in 2020, reflecting

NASDAQ: XBIO xeneticbio.com Expanding the Potential of CAR T Cell Therapy Investor Presentation M a r c h 2021 Forward-Looking Statements This presentation contains forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements contained in this presentation other than statements of historical facts may constitute forward-looking statements within the meaning of the federal securities laws. These statements can be identified by w ...

NASDAQ: XBIO xeneticbio.com Expanding the Potential of CAR T Cell Therapy Investor Presentation JANUARY 2021 Forward-Looking Statements This presentation contains forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements contained in this presentation other than statements of historical facts may constitute forward-looking statements within the meaning of the federal securities laws. These statements can be identified by wor ...

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 ...