Xenetic Biosciences(XBIO) - 2022 Q4 - Annual Report

PART I Business Overview Xenetic Biosciences, Inc. focuses on developing immuno-oncology technologies, primarily the DNase tumor platform for refractory cancers, pausing XCART development, and leveraging PolyXen for drug delivery partnerships Company Overview - The company licensed the DNase tumor platform in April 2022, aiming to improve existing immuno-oncology treatments by targeting NETs, with plans to advance IV rhDNase I into first-in-human clinical trials for locally advanced or metastatic solid tumors, including pancreatic cancer[23][25][27] - Pancreatic cancer has a five-year survival rate of only 7-8%, dropping to 3% for metastatic disease, highlighting the urgent need for new treatment options[25] - The company partnered with Volition to explore combining Volition's Nu.Q® technology with Xenetic's DNase-Armored CAR T platform for cell therapies targeting various solid tumors[30] - Development of the XCART personalized CAR T platform technology has been paused, with resources redirected to the DNase project[31] - PolyXen is a proprietary drug delivery platform utilizing polysialic acid (PSA) to extend the half-life of protein and peptide drugs, with existing collaborations with biotechnology and pharmaceutical companies[32] Company Strategy - The company's primary strategy is to advance the systemic DNase program into clinical trials as an adjuvant therapy for pancreatic and other solid tumors, aiming to improve responses to checkpoint inhibitors, chemotherapy, and other standard treatments while overcoming resistance[36] - The company plans to seek orphan drug designation and accelerated approval pathways for relevant oncology indications to gain advantages such as market exclusivity[38] - The company will primarily advance DNase platform development through contract manufacturing organizations (CMOs) and contract research organizations (CROs) to efficiently manage resources[39] Business Developments - On April 26, 2022, the company entered an exclusive sublicense agreement with CLS for the exclusive license of DNase enzyme for cancer treatment, issuing 375,000 shares of common stock and committing up to $13 million in milestone payments and royalties[40][41] - On the same day, the company signed an exclusive license agreement with CLS for the exclusive license of DNase combined with CAR T therapy, paying $500,000 in cash, issuing 500,000 shares of common stock, and committing up to $13 million in milestone payments and royalties[42][43] - On October 4, 2022, the company completed patent transfers related to its collaborations with Volition and CLS, issuing 850,000 shares of common stock to CLS LLC as consideration for certain patent rights[45] - On August 2, 2022, the company announced a collaboration with Volition to develop adoptive cell therapies targeting NETs, with Volition funding the research and both parties sharing commercialization revenues[46] - On June 30, 2022, the company signed a statement of work with Catalent for cGMP manufacturing services of recombinant human DNase I, with an estimated total project cost of up to $5 million, planned for completion in the first half of 2024[47][64] - On March 17, 2023, the company entered a research funding and option agreement with Scripps Research, providing up to $938,000 to fund preclinical development of the DNase tumor platform technology[48][573] Our Technology and Drug Candidates - In 2022, internal development focused on licensing and advancing the DNase tumor platform and XCART technology, while PolyXen and other technologies were not actively pursued[51] - The DNase platform aims to target NETs to improve existing treatment efficacy, with first-in-human studies planned for 2024-2025, initially targeting multi-billion dollar markets like pancreatic cancer[53][55] - The XCART technology platform aimed to develop personalized CAR T-cell therapies for B-cell lymphoma by targeting patient-specific B-cell receptors, but further development is currently paused[55] - PolyXen is a bioplatform technology that chemically links PSA to extend drug molecule circulation time in the body, aiming to create superior next-generation therapeutic candidates[55] - ErepoXen (PSA-EPO) is a PolyXen platform candidate for anemia in chronic kidney disease, with Pharmsynthez completing Phase II(b)/III clinical trials and submitting a registration application in Russia, and Serum Institute completing Phase I/II clinical trials in India[56][59][61] Significant Collaborations and Strategic Arrangements - The company has a non-exclusive sublicense agreement with Takeda for PolyXen technology, generating approximately $1.7 million and $1.2 million in royalty revenue in 2022 and 2021, respectively[63][472] - The company signed a service agreement with Catalent for cGMP manufacturing of recombinant human DNase I protein, with an estimated total project cost of up to $5 million, planned for completion in the first half of 2024[64][473] - The research funding agreement with Scripps Research for XCART preclinical development terminated additional funding in the second quarter of 2022[66][475] - The company has an exclusive license agreement with Pharmsynthez for PolyXen and ImuXen technology products, with Pharmsynthez responsible for development and commercialization in Russia and CIS countries, and the company entitled to sales royalties[67][70][484] - The company has an exclusive license agreement with Serum Institute for PolyXen technology PSA-EPO products, with Serum Institute responsible for clinical trials and regulatory approvals in specific territories, and the company entitled to sales royalties[73][487] Our Intellectual Property - As of January 23, 2023, the company directly or indirectly owns over 170 U.S. and international patents and pending patent applications, covering DNase, XCART, and PolyXen platform technologies[77] - The company has obtained patent protection for PolyXen technologies (e.g., PSA-EPO, PSA-insulin, PSA-rFVIII) and methods for PSA production and endotoxin removal[79][80] - The company also secured patent protection for DNase technology in cancer treatment and mitigating cancer treatment side effects, including use alone or in combination with cancer therapeutics, CAR-T cells, immune checkpoint inhibitors, or modulators[81] - U.S. patents typically provide 20 years of exclusivity from the earliest effective filing date, with potential extensions of up to 5 years through patent term extension mechanisms[82] Manufacturing and Supply - The company lacks internal manufacturing capabilities and relies on third-party manufacturers to support drug candidate development programs[88] - The company has agreements with Catalent and Serum Institute for the manufacturing of clinical materials for DNase and PolyXen technology-related drug candidates[88] - XCART technology currently lacks third-party manufacturing agreements, and the company will seek third-party manufacturers to meet future clinical supply needs[88] Government Regulation - In the U.S., new drugs require FDA approval via NDA or BLA processes, involving preclinical testing, IND submission, three phases of clinical trials, cGMP manufacturing inspections, and FDA review[89][90][92][94][95][102] - The FDA offers expedited development and review programs like orphan drug designation (7 years of market exclusivity), Fast Track, Priority Review, Accelerated Approval, and Breakthrough Therapy designation to facilitate drug development for serious or life-threatening conditions[106][110][111][112] - Approved products remain subject to ongoing regulatory requirements, including manufacturing, labeling, promotion, post-market studies, and safety reporting, with non-compliance potentially leading to approval withdrawal or market restrictions[105][115][184][186] - The Biologics Price Competition and Innovation Act (BPCIA) provides 12 years of data exclusivity for innovative biologics, while the Hatch-Waxman Amendments allow patent term extensions of up to 5 years[116][117] - In the EU, drug marketing requires a marketing authorization application, with new chemical entities typically receiving 8 years of data exclusivity and 2 years of market exclusivity, and orphan drugs potentially gaining 10 years of market exclusivity[124][126] - Drug sales and reimbursement are heavily regulated by third-party payers (e.g., government healthcare, commercial insurers), who increasingly challenge drug prices and implement cost control measures, such as the Inflation Reduction Act allowing Medicare to directly negotiate drug prices[134][135] Environmental Regulation - The company complies with environmental regulations, incurring low compliance costs as it does not engage in manufacturing drug candidates[142] - The company uses hazardous and flammable materials, posing risks of accidental contamination or injury, but has not purchased specific insurance to mitigate this risk[143] Employees - As of December 31, 2022, the company had four full-time employees and utilizes external experts and consultants to supplement internal professionals[144][145] Competition - The biotechnology and pharmaceutical industries are highly competitive, with the company facing competition from large pharmaceutical, specialty pharmaceutical, and biotechnology companies, as well as academic and government institutions[146][147] - Key competitive factors include efficacy, safety, side effects, convenience, price, generic competition, and reimbursement accessibility[148] - In pancreatic cancer, the company will compete with existing approved treatments (e.g., gemcitabine combined with Abraxane or FOLFIRINOX) and products like Merck's KEYTRUDA and Lynparza[152] - In B-cell lymphoma CAR T-cell therapy, the company faces competition from approved products like Novartis' Kymriah, Gilead's Yescarta and Tecartus, Bristol Myers Squibb's Breyanzi and Abecma, Janssen's Carvykti, and over a hundred CAR T-cell therapies in development[154] - In PSA drug delivery platforms, the company faces competition from existing platforms such as PEGylation, Fc-fusion, albumin-fusion, HESylation, PASylation, and CTP-fusion[155] - The company primarily focuses on advancing the DNase tumor platform, aiming to improve existing cancer treatment efficacy by targeting NETs, especially for pancreatic cancer and locally advanced or metastatic solid tumors[23][27][36] - The XCART personalized CAR T-cell platform technology development has been paused, with resources prioritized for the DNase project[31][55] - The PolyXen drug delivery platform collaborates with biotechnology and pharmaceutical companies, utilizing polysialic acid (PSA) to extend drug half-life and generate royalty income in the hemophilia field[32][63] Risk Factors The company faces multiple risks including uncertain profitability, significant capital needs, reliance on its DNase platform, clinical and regulatory challenges, third-party dependencies, intellectual property issues, and stock market volatility Risks Related to Our Financial Condition and Capital Requirements - The company has never been profitable, with accumulated losses of approximately $189.1 million as of December 31, 2022, and may not achieve or maintain profitability in the future[160][162] - The company requires substantial additional funding to achieve its objectives; failure to obtain financing on acceptable terms in a timely manner may force delays, limitations, or termination of product development or commercialization efforts[163][167] - Raising additional capital may result in dilution for existing shareholders, restrict company operations, or require the company to relinquish rights to technologies or drug candidates[169][170] Risks Related to the Discovery and Development of our Pharmaceutical Products - The company's business is highly dependent on the successful clinical development, regulatory approval, and commercialization of the DNase tumor platform; failure to secure necessary collaborations or funding may delay or terminate clinical development[171] - As an early-stage pharmaceutical company, no products have received commercial approval, with revenue primarily from a single partner's royalties, and business operations may not fully materialize or create value for investors[173] - Clinical studies may be delayed or hindered by difficulties in patient enrollment, impacting product development timelines and regulatory approvals[174][176] - Clinical trials may experience significant delays or fail to demonstrate safety and efficacy, thereby impeding or delaying the commercialization of drug candidates[178] - Even upon completing clinical studies, it is unpredictable when or if regulatory approval will be obtained, and approval may be limited to narrower indications than anticipated[183] - Approved products will remain subject to ongoing regulatory scrutiny, and non-compliance may lead to approval withdrawal or market restrictions[184][188] - The commercial success of any future drugs depends on market acceptance by physicians, patients, and third-party payers[189] - The commercial potential of drug candidates is difficult to predict; if market size is smaller than expected, it could negatively impact revenue and financial condition[193] - Failure to obtain or maintain adequate reimbursement may limit product market penetration and reduce revenue[194][199] - The company may allocate limited resources to projects with lower ultimate commercial potential or fail to identify and develop more profitable projects[200] - The company may not successfully identify or discover additional drug products, leading to development failures[201][202] - The market opportunity for drug candidates may be limited to patients who do not qualify for or have failed existing treatments, potentially resulting in a small market size[204][205] - Clinical trials may fail to demonstrate the safety and efficacy of drug candidates, thereby preventing or significantly delaying regulatory approval[206][207] - The company may not obtain orphan drug designation, or even if obtained, may not maintain associated benefits, including market exclusivity[211][212] - Healthcare reform measures could materially adversely affect the company's business and operating results, such as the Inflation Reduction Act potentially impacting Medicare drug pricing[213][214][216] Risks Related to Our Reliance on Third-Parties - The company may seek additional collaborations; failure to secure them on commercially reasonable terms may necessitate changes to development and commercialization plans[219][222] - Conflicts with collaborators or strategic partners may arise, where they act in their own interests, limiting the company's strategic implementation[224][225] - The company relies on third parties for clinical study oversight and monitoring; poor performance by them could harm the company's business[226][228] - Collaborators or strategic partners may adopt alternative technologies or fail to develop commercially viable products using the company's technology, negatively impacting revenue and product development strategy[230] - If collaborations are established, the company may be forced to relinquish significant rights and control over drug candidate development or accept unfavorable terms[231] - The company lacks internal manufacturing, sales, marketing, or distribution capabilities and may need to invest substantial resources to develop these[232][233] - Reliance on third parties requires sharing trade secrets, increasing the risk of competitors discovering or misappropriating trade secrets[234][236] - Contract manufacturers are highly regulated; failure to consistently meet regulatory requirements or limited capacity could lead to clinical study delays, hindered regulatory submissions, or commercialization failures[238][239][240][241][243] Risks Related to Our Intellectual Property - Failure to adequately protect or enforce intellectual property may hinder effective operations, as patents and trademarks could be challenged, invalidated, or canceled[244][245] - Granted patents for drug candidates, if challenged in court, may be deemed invalid or unenforceable[250] - The company may be unable to protect intellectual property globally, preventing it from stopping third parties from using its inventions or selling infringing products in certain countries[251][252] - If the company infringes on others' intellectual property, it may face significant liability, be required to cease using relevant technology, or pay royalties, adversely affecting business and profitability[254] - Failure to comply with license agreement obligations or a breakdown in licensor relationships could result in the loss of license rights critical to the business[256][257][258] - The company may face allegations of improper use or disclosure of third-party confidential information or former employers' trade secrets by employees, consultants, or independent contractors[260] - The company may face claims challenging the inventorship or ownership of patents or other intellectual property[262] - Inability to protect confidential information and trade secrets will harm the company's business and competitive position[263] - The company may become involved in litigation to protect or enforce patents, which can be costly, time-consuming, and potentially unsuccessful[264][265] - Changes in U.S. patent law could diminish patent value and weaken the company's ability to protect its products[268][269] - Obtaining and maintaining patent protection depends on complying with various procedural, filing, and fee payment requirements of government patent agencies; non-compliance may result in loss of patent rights[270] Risks Related to Our Business Operations - Adverse developments in the financial services industry (e.g., bank liquidity issues or failures) could negatively impact the company's current and future business operations, financial condition, and operating results, such as the SVB collapse[272][276][277] - The company's future success depends on retaining key members of its executive team, advisors, and consultants, and attracting, retaining, and motivating qualified personnel[279] - The company needs to expand its organization and may encounter difficulties managing growth, which could disrupt operations[281] - The company is a party to collaboration agreements and other material agreements containing complex commercial terms, potentially leading to disputes, litigation, or indemnification liabilities[282][283] - The company operates in a highly competitive field, and competing technologies could harm its business development[285] - Potential new accounting pronouncements or legislative actions could adversely affect the company's future financial condition or operating results[286][287] Risks Related to Our Common Stock - Failure to meet Nasdaq's continued listing requirements (e.g., minimum bid price) could result in common stock delisting, impacting share price and liquidity, and reducing financing capabilities[288][289][292] - The market price of the company's securities may be highly volatile, and investors may be unable to sell their securities[293][294] - The rights, preferences, and privileges of preferred stock are senior to common stockholders, potentially leading to divergent interests[295] - Future issuances of common stock may result in dilution for existing shareholders[296][297] - The company may face securities class action lawsuits[298] - An active, liquid, and orderly market for the company's common stock or warrants may not develop[299] - Agreements entered into by the company with its shareholders may create conflicts of interest[300] - The company does not intend to pay dividends on common or preferred stock, so any return will be limited to stock value[302] - Certain provisions in the company's certificate of incorporation, bylaws, and Nevada Revised Statutes may have anti-takeover effects, potentially leading to a decrease in common stock market price[303] General Risk Factors - Adverse U.S. or global economic conditions (e.g., COVID-19 pandemic, Russia-Ukraine conflict, and related sanctions) could negatively impact the company's financial condition, operating results, business, and cash flows[304][305][306][308] - The company's ability to utilize potential future operating losses and federal and state NOL carryforwards to offset taxable income may be limited[309][310] - Tax reforms could significantly impact the company and its shareholders, leading to inaccurate estimates of effective tax rates and deferred income tax assets and liabilities[311][312] - Governments may implement price controls, adversely affecting the company's future profitability[313] - Company employees, principal investigators, consultants, and business partners may engage in misconduct, including non-compliance with regulatory standards and insider trading[315] - Use of the company's drug candidates may result in adverse side effects, leading to hindered regulatory approval or product liability lawsuits[316][317] - The company faces potential product liability; successful claims could result in substantial liabilities and costs[319] - Failure to comply with environmental, health, and safety laws and regulations could result in fines or costs, materially adversely impacting business success[320][321] - Non-cash expenses such as stock-based compensation may adversely affect operating results[322] - Differing interpretations of existing standards and rules could lead to the company restating previously reported operating results[324] - The company's disclosure controls and procedures may not prevent or detect all errors or fraud[325] - Information technology system failures, including cybersecurity attacks or other data security incidents, could severely disrupt company operations[326][327] - As a smaller reporting company, simplified reporting requirements may reduce the attractiveness of the company's common stock to investors[328] - The company has never been profitable, with accumulated losses of approximately $189.1 million as of December 31, 2022, faces uncertain future profitability, and requires substantial additional funding for product development and commercialization[160][162][163] - The company's business is highly dependent on the successful development, regulatory approval, and commercialization of the DNase tumor platform; failure to secure necessary collaborations or funding may delay or terminate clinical development[171] - Clinical studies may be delayed or terminated due to patient recruitment difficulties, regulatory delays, or unfavorable clinical trial results, impacting timely product commercialization[174][176][178] - Even with regulatory approval, products will remain subject to ongoing regulatory scrutiny, and commercial success depends on market acceptance by physicians, patients, and third-party payers, as well as adequate reimbursement[184][189][194] - The company relies on third parties for manufacturing, clinical research, and distribution; poor performance by or disruption of relationships with third parties could adversely affect the business[226][232][234][237] - Intellectual property protection faces challenges, with patents potentially being challenged as invalid or unenforceable globally, and the risk of infringing on others' intellectual property[244][250][251][254] - The company faces operational risks including adverse financial services industry developments (e.g., SVB collapse), loss of key personnel, difficulties managing organizational expansion, collaboration agreement disputes, intense competition, changes in accounting standards, and information technology system failures[272][279][281][282][285][286][326] - The company's common stock may face delisting risk due to failure to meet Nasdaq listing requirements, and its stock price may be highly volatile[288][293] Unresolved Staff Comments The company has no unresolved staff comments Properties The company leases office spaces in Framingham, Massachusetts, and Miami, Florida, deeming current facilities adequate with options for additional space - The company leases shared office space in Framingham, Massachusetts, with the lease term extending until September 2023[331] - The company leases 360 square feet of office space in Miami, Florida, with the lease term extended until November 30, 2023[332] Legal Proceedings The company is occasionally involved in litigation and claims, but management believes these will not materially impact its financial condition or operations as of December 31, 2022 - The company may face litigation and claims, but as of December 31, 2022, management believes these will not materially adversely affect its financial condition, operating results, or cash flows[333][334] Mine Safety Disclosures Not applicable PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock and warrants are listed on Nasdaq, with 426 common stockholders as of March 10, 2023, and no cash dividends have been declared, with future earnings retained for business development - The company's common stock and warrants are listed on the Nasdaq Capital Market under the symbols “XBIO” and “XBIOW”, respectively[338] - As of March 10, 2023, the company had 426 holders of common stock[339] - The company has never declared or paid any cash dividends on its common stock and plans to retain earnings for business development in the foreseeable future[340] - The company did not repurchase any outstanding shares of common stock during the fourth quarter of 2022[343] Item 6 [Reserved] This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations The company focuses on the DNase platform, reported increased revenue and R&D expenses in 2022, a net loss of $6.6 million, and faces significant going concern doubts despite securing its funds from SVB BUSINESS OVERVIEW - The company focuses on advancing the DNase tumor platform, aiming to improve existing cancer treatment efficacy by targeting NETs, and has paused XCART platform development, concentrating resources on the DNase project[346][347] - The company collaborates with biotechnology and pharmaceutical companies through its PolyXen drug delivery platform, generating royalties in the hemophilia field[346][347] - To date, none of the company's drug candidates have received marketing authorization or approval from the U.S. FDA or other national regulatory authorities[347] Critical Accounting Policies and Estimates - The company recognizes revenue under ASC Topic 606, involving five steps: identifying contracts, performance obligations, transaction price, allocating transaction price, and recognizing revenue, with critical judgments for milestone payments and variable consideration[352][353][354][355][356] - Research and development expenses are recognized as incurred, including compensation and benefits, facility costs, preclinical development, clinical trials and related manufacturing, and fees paid to CROs and CMOs[358][359] - Stock-based compensation expense is based on the estimated fair value of options or restricted stock units, calculated using the Black-Scholes option pricing model, requiring judgment on assumptions like volatility and expected term[362][363] - Warrants are valued using the Black-Scholes model, with fair value recognized as expense over the service period or on the issuance date[364][365] - Intangible assets (including in-process research and development, IPR&D) are recognized at fair value, not amortized, but reviewed for impairment at least annually[366][368][369] - The ultimate impact of the COVID-19 pandemic and the Russia-Ukraine conflict on the company's business, operations, and financial performance remains uncertain[371][372] Results of Operations Operating Results Overview (2022 vs. 2021) | Item | 2022 (USD) | 2021 (USD) | Change (USD) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 1,706,925 | 1,160,692 | 546,233 | 47.1% | | Research and Development Expenses | (4,770,834) | (3,163,485) | 1,607,349 | 50.8% | | General and Administrative Expenses | (3,653,999) | (3,743,972) | (89,973) | (2.4)% | | Operating Loss | (6,717,908) | (5,746,765) | 971,143 | 16.9% | | Other Income (Expense) | (1,597) | 1,119 | 2,716 | 242.7% | | Interest Income, Net | 167,152 | 100,467 | 66,685 | 66.4% | | Net Loss | (6,552,353) | (5,645,179) | 907,174 | 16.1% | - Revenue increased by 47.1% to $1.7 million in 2022, primarily due to increased royalty income from the Takeda sublicense agreement[376] - Research and development expenses increased by 50.8% to $4.8 million in 2022, mainly due to $1.8 million in in-process research and development (IPR&D) expenses related to the DNase platform license[377] - Excluding IPR&D expenses, 2022 R&D expenses decreased by 5.9% to $3.0 million, primarily due to reduced XCART technology platform expenditures, partially offset by initial DNase platform development costs[378] - General and administrative expenses decreased by 2.4% to $3.7 million in 2022, mainly due to reduced consulting and legal fees related to the intellectual property portfolio, partially offset by increased legal fees for the DNase platform license[379] - Net interest income increased to approximately $0.2 million in 2022, primarily due to higher interest rates on invested funds[381] Liquidity and Capital Resources - The company reported a net loss of approximately $6.6 million in 2022, with accumulated losses of approximately $189.1 million, and working capital decreased from $17.3 million in 2021 to $12.6 million in 2022[382] - As of December 31, 2022, the company had approximately $13.1 million in cash and $1.1 million in current liabilities[383] - The company faces significant going concern doubts but believes existing resources are sufficient for the next 12 months of operations and plans to secure additional capital through equity financing, debt financing, or collaborations[385] - The company fully recovered its deposits at SVB on March 13, 2023, and expects no losses from the event[386][575] - Cash outflow from operating activities was approximately $4.6 million in 2022, primarily due to net loss, partially offset by non-cash expenses such as in-process research and development (IPR&D) and stock-based compensation[387] - Cash outflow from investing activities was $0.5 million in 2022, used for the DNase tumor platform license[388] - There was no cash flow from financing activities in 2022, compared to a cash inflow of approximately $11.5 million in 2021, primarily from net proceeds of a private placement in July 2021[389] Contractual Obligations - The company's contractual obligations primarily stem from office space leases, excluding potential CMO service payments due to their unpredictable timing, amount, and cancellable nature[391] Contractual Obligations (As of December 31, 2022) | Obligation Type | Total (USD) | Less than 1 Year (USD) | 1-3 Years (USD) | 3-5 Years (USD) | More than 5 Years (USD) | | :--- | :--- | :--- | :--- | :--- | :--- | | Lease Obligations | 28,524 | 28,524 | – | – | – | Recent Accounting Standards - The company is evaluating the impact of ASU 2016-13, Financial Instruments—Credit Losses, and does not expect a material impact on its consolidated financial statements[393][471] - The company primarily focuses on advancing the DNase tumor platform, has paused XCART technology platform development, and concentrates resources on the DNase project[346][347][378] - The company reported a net loss of approximately $6.6 million in 2022, with accumulated losses of approximately $189.1 million, and working capital decreased from $17.3 million in 2021 to $12.6 million in 2022[375][382] - The company faces significant going concern doubts but believes capital can be obtained through equity financing, debt financing, or collaborations, with existing resources sufficient for the next 12 months of operations[385] - The company fully recovered its deposits at SVB on March 13, 2023, and expects no losses from the event[386][575] Operating Results Overview (2022 vs. 2021) | Item | 2022 (USD) | 2021 (USD) | Change (USD) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 1,706,925 | 1,160,692 | 546,233 | 47.1% | | Research and Development Expenses | (4,770,834) | (3,163,485) | 1,607,349 | 50.8% | | General and Administrative Expenses | (3,653,999) | (3,743,972) | (89,973) | (2.4)% | | Operating Loss | (6,717,908) | (5,746,765) | 971,143 | 16.9% | | Other Income (Expense) | (1,597) | 1,119 | 2,716 | 242.7% | | Interest Income, Net | 167,152 | 100,467 | 66,685 | 66.4% | | Net Loss | (6,552,353) | (5,645,179) | 907,174 | 16.1% | Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide this information Financial Statements and Supplementary Data This section includes the company's consolidated financial statements for 2022 and 2021, with an unqualified opinion from Marcum LLP, highlighting going concern and royalty revenue as key audit matters, and detailed notes on accounting policies and strategic agreements - Independent registered public accounting firm Marcum LLP issued an unqualified opinion on the company's consolidated financial statements as of December 31, 2022, and 2021[399] - Going concern assessment and royalty revenue recognition were identified as key audit matters, involving significant judgments regarding future cash flow projections and variable consideration estimates[404][407][408] Consolidated Balance Sheets (As of December 31, 2022 and 2021) | Item | 2022 (USD) | 2021 (USD) | | :--- | :--- | :--- | | Assets | | | | Cash | 13,097,265 | 18,244,030 | | Prepaid Expenses and Other Current Assets | 556,094 | 479,399 | | Total Current Assets | 13,653,359 | 18,723,429 | | Other Assets | 1,066,931 | 1,091,931 | | Total Assets | 14,720,290 | 19,815,360 | | Liabilities and Stockholders' Equity | | | | Accounts Payable | 287,360 | 362,470 | | Accrued Expenses and Other Current Liabilities | 785,796 | 1,058,633 | | Total Current Liabilities | 1,073,156 | 1,421,103 | | Total Liabilities | 1,073,156 | 1,421,103 | | Preferred Stock | 2,774 | 2,774 | | Common Stock | 15,192 | 13,465 | | Additional Paid-in Capital | 207,756,232 | 205,952,729 | | Accumulated Deficit | (189,099,618) | (182,547,265) | | Accumulated Other Comprehensive Income | 253,734 | 253,734 | | Treasury Stock | (5,281,180) | (5,281,180) | | Total Stockholders' Equity | 13,647,134 | 18,394,257 | | Total Liabilities and Stockholders' Equity | 14,720,290 | 19,815,360 | Consolidated Statements of Comprehensive Loss (For the Years Ended December 31, 2022 and 2021) | Item | 2022 (USD) | 2021 (USD) | | :--- | :--- | :--- | | Revenue | 1,706,925 | 1,160,692 | | Operating Costs and Expenses | (8,424,833) | (6,907,457) | | Operating Loss | (6,717,908) | (5,746,765) | | Other Income, Net | 165,555 | 101,586 | | Net Loss | (6,552,353) | (5,645,179) | | Net Loss Per Share, Basic and Diluted | (0.46) | (0.55) | | Weighted-Average Common Shares Outstanding, Basic and Diluted | 14,224,430 | 10,279,408 | Consolidated Statements of Cash Flows (For the Years Ended December 31, 2022 and 2021) | Cash Flow Activities | 2022 (USD) | 2021 (USD) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (4,646,765) | (4,738,067) | | Net Cash Used in Investing Activities | (500,000) | – | | Net Cash Provided by Financing Activities | – | 11,454,545 | | Net Change in Cash | (5,146,765) | 6,716,478 | | Cash at Beginning of Period | 18,244,030 | 11,527,552 | | Cash at End of Period | 13,097,265 | 18,244,030 | Notes to Consolidated Financial Statements Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable Controls and Procedures Management assessed the effectiveness of disclosure controls and internal financial reporting controls as of December 31, 2022, concluding they are effective at a reasonable assurance level, with no auditor attestation report included - As of December 31, 2022, the company's disclosure controls and procedures were assessed by management as effective at a reasonable assurance level[578][579] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2022[580] - This annual report does not include an attestation report of the company's registered public accounting firm regarding the effectiveness of internal control over financial reporting, as the company is a non-accelerated filer[581] - No material changes occurred in the company's internal control over financial reporting during the reporting period[582] - Controls and procedures have inherent limitations, providing only reasonable, not absolute, assurance, and may not prevent or detect all errors or fraud[584] Other Information The company entered a research funding and option agreement with Scripps Research on March 17, 2023, providing up to $938,000 for preclinical DNase tumor platform development with exclusive global licensing rights - On March 17, 2023, the company entered a research funding and option agreement with Scripps Research, providing up to $938,000 to fund preclinical development of the DNase tumor platform technology[585] - The agreement has a 15-month term, granting the company the right to an exclusive worldwide license for Scripps Research's related technology or patent rights[586] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable PART III Directors, Executive Officers and Corporate Governance Information required for this item will be filed via the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders or an amendment to this annual report Executive Compensation Information required for this item will be filed via the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders or an amendment to this annual report Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required for this item will be filed via the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders or an amendment to this annual report Certain Relationships and Related Transactions, and Director Independence Information required for this item will be filed via the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders or an amendment to this annual report Principal Accounting Fees and Services Information required for this item will be filed via the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders or an amendment to this annual report PART IV Exhibits and Financial Statement Schedules This annual report includes consolidated financial statements and the independent registered public accounting firm's report, with all schedules omitted and an exhibit index listing all filed or incorporated by reference exhibits - This annual report includes the consolidated financial statements and the report of the independent registered public accounting firm[601] - All schedules have been omitted as they are not applicable or required, or the information required is presented in the consolidated financial statements or their notes[601] - The Exhibit Index lists the exhibits filed with or incorporated by reference into this annual report[601][602] Form 10-K Summary Not applicable