Investing in our common stock involves a high
degree of risk. You should carefully consider the risks described below, together with our unaudited condensed consolidated financial
statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q (this “Quarterly Report”) before
making a decision to invest in our securities. The risks and uncertainties described below are not the only ones we face. Additional risks
and uncertainties not presently known to us, or that we currently believe are not material, also may become important factors that affect
us and impair our business operations. The occurrence of any of the events or developments discussed in the risk factors below could have
a material and adverse impact on our business, financial condition, results of operations and cash flows and, in such case, our future
prospects would likely be materially and adversely affected.
Unless the context otherwise requires, references
to the “Company,” the “combined company,” “Mosaic,” “we,” “our,” or “us”
in this quarterly report refer to Mosaic ImmunoEngineering, Inc. and its subsidiaries (formerly known as Patriot Scientific Corporation).
References to “PTSC” and “Private Mosaic” refer to Patriot Scientific Corporation and privately held Mosaic ImmunoEngineering,
Inc., respectively, prior to the completion of a reverse merger in August 2020.
Risks Related to Our Operations
The Company’s financial statements have
been prepared on a going concern basis, and do not include adjustments that might be necessary if the Company is unable to continue as
a going concern.
The Company’s unaudited condensed consolidated
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As of March 31, 2022, the Company had incurred operating losses since inception, and continues
to generate losses from operations, and had an accumulated deficit of $5,290,716. These matters raise substantial doubt about the Company’s
ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments relating
to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company
be unable to continue as a going concern.
We expect that we will incur significant losses
over the next several years and may never achieve or maintain profitability.
Private Mosaic was formed on March 30, 2020; therefore,
we have limited operating history. We have not raised any capital other than $575,000 and $341,632 from the issuance of our convertible
notes in May 2021 and February 2022, respectively. Our historical results do not reflect the significant costs required to develop our
product candidates. In addition, our products are in preclinical development and therefore, we anticipate that our expenses will increase
substantially over the next several years, if and as we:
| · | develop product manufacturing processes under
the Food and Drug Administration's (“FDA’s”) current Good Manufacturing Practice regulations (“cGMP”) for
each of our product candidates and enter into manufacturing supply agreements to support toxicology studies and our planned Phase I clinical
trials; |
| · | contract preclinical toxicology studies to support
the safety of our product candidates prior to starting any human trial; |
| · | continue preclinical research and translational
studies to enhance our understanding of the mechanism of action of the product candidates; |
| · | enter into collaboration arrangements with regards
to product discovery and product development; |
| · | in-license our products and technologies from
Case Western Reserve University and acquire rights to other technologies; |
| · | prepare regulatory filings, such as filing IND
applications with the FDA that are required prior to starting any human clinical trial; |
| · | plan, initiate, enroll, and complete clinical
trials; |
| · | maintain, expand and protect our intellectual
property portfolio; |
| · | hire additional personnel to support our research,
development, and administrative efforts; and |
| · | operate as a public company. |
We expect that it will be several years, if ever,
before we have a product candidate ready for commercialization. If we are unable to advance our product candidates and begin to generate
clinical data, we may have greater difficulty raising capital on favorable terms, or at all. In addition, there are many risks associated
with our financial position and need for additional capital, as further described below under the section titled “RISKS RELATED
TO OUR FINANCIAL POSITION AND NEED FOR ADDITIONAL CAPITAL”.
If we are able to raise sufficient capital, we
expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses that we incur
may fluctuate significantly from quarter to quarter and year to year.
To become and remain profitable, we or a potential
partner must develop and eventually commercialize a product or products with significant market potential. This will require us to be
successful in a range of challenging activities, including completing all phases of clinical trials of our product candidates, obtaining
marketing approval for these product candidates and manufacturing, marketing and selling those products for which we obtain marketing
approval. We or a potential partner may never succeed in these activities and, even if we do, may never generate revenues that are significant
or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis. Our development efforts will take several years and will require significant capital, that will dilute the
ownership interest of common stockholders. A decline in the value of the Company could also cause stockholders to lose all or part of
their investment.
We are early in our development efforts and our product candidates
are in preclinical development.
We currently do not have any products that have
gained regulatory approval. Our ability to generate product revenues, which we do not expect will occur for several years, if ever, will
depend heavily on the successful development and eventual commercialization of our product candidates. As a result, our business is substantially
dependent on our ability to successfully complete the development of and obtain regulatory approval for our product candidates.
We have not yet demonstrated an ability to successfully
overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the
nanotechnology area. If we are unsuccessful in accomplishing the numerous and complex objectives in developing our product candidates,
we may not be able to successfully develop and commercialize our two product candidates, and our business will suffer.
Our short operating history may make it difficult
to evaluate the success of our business to date and to assess our future viability.
We are an early development stage biotechnology
company formed on March 30, 2020. Our ongoing operations to date have been limited to organizing the Company, business planning, acquiring
rights to license the technology, identifying potential product candidates, and undertaking preclinical studies in collaboration with
our external researchers under university approved grants. In addition, we have limited human resources to help us achieve our goals.
Consequently, any predictions made about our future success or viability based on our short operating history to date may not be as accurate
as they could be if we had a longer and more established operating history. In addition, as an early-stage business, we may encounter
unforeseen expenses, difficulties, complications, delays and other known and unknown factors.
Business interruptions resulting from the coronavirus
disease (COVID-19) outbreak or similar public health crises could cause a disruption of the development of our product candidates and
adversely impact our business.
In March 2020, the World Health Organization declared
the novel coronavirus disease (COVID-19) outbreak a global pandemic. To limit the spread of COVID-19, governments have taken various actions
including the issuance of stay-at-home orders and physical distancing guidelines. Accordingly, businesses have adjusted, reduced or suspended
operating activities. We may experience disruptions as a result of COVID-19 that could severely impact our business and planned clinical
trials, including:
| · | delays or difficulties in planned clinical site
initiation, including difficulties in recruiting clinical site investigators and clinical site staff; |
| · | delays or difficulties in enrolling patients
in our planned clinical trials and further incurrence of additional costs as a result of preclinical study and clinical trial delays and
adjustments; |
| · | challenges related to ongoing and increased operational
expenses related to the COVID-19 pandemic; |
| · | delays, difficulties or increased costs to comply
with COVID-19 protocols; |
| · | diversion of healthcare resources away from the
conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the
conduct of clinical trials; |
| · | interruption of key clinical trial activities,
such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers
and others; |
| · | limitations in resources that would otherwise
be focused on the conduct of our business or our clinical trials, including because of sickness or the desire to avoid contact with large
groups of people or as a result of government-imposed “Stay-at-Home” orders or similar working restrictions; |
| · | delays in receiving approval from local regulatory
authorities to initiate our planned clinical trials; |
| · | delays in preclinical and clinical sites receiving
the supplies and materials needed to conduct our planned clinical trials; |
| · | interruption in global shipping that may affect
the transport of clinical trial materials, such as investigational drug product used in our planned clinical trials; |
| · | changes in regulations as part of a response
to the COVID-19 pandemic which may require us to change the ways in which our planned clinical trials may be conducted, or which may result
in unexpected costs; |
| · | delays in necessary interactions with regulators,
ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government
or contractor personnel; and |
| · | increased competition for contract research organizations
(“CROs”), suppliers and vendors. |
We will continue to assess the impact that COVID-19
may have on our ability to effectively conduct our business operations as planned and there can be no assurance that we will be able to
avoid a material impact on our business from the spread of COVID-19 or its consequences, including disruption to our business and downturns
in business sentiment generally or in our industry. Should COVID-19 cases in USA increase, the country or states may institute stricter
social distancing protocols.
Additionally, third parties that we may engage,
including our collaborators, contract organizations, third-party manufacturers, suppliers, clinical trial sites, regulators and other
third parties with whom we conduct business are similarly adjusting their operations and assessing their capacity in light of the COVID-19
pandemic. If these third parties experience shutdowns or continued business disruptions, our ability to conduct our business in the manner
and on the timelines presently planned could be materially and negatively impacted. It is likely that the disproportionate impact of COVID-19
on hospitals and clinical sites will have an impact on recruitment and retention for our planned clinical trials. In addition, our future
clinical trial sites could experience delays in collecting, receiving and analyzing data from patients enrolled in our planned clinical
trial due to limited staff at such sites, limitation or suspension of on-site visits by patients, or patients’ reluctance to visit
the clinical trial sites during the pandemic. As a result, research and development expenses and general and administrative expenses may
vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of our panned clinical
trial and other related business activities.
As we continue to actively advance our clinical
programs and discovery and research programs, we are assessing the impact of the COVID-19 pandemic on each of our programs, expected timelines
and costs on an ongoing basis. In light of ongoing developments relating to the COVID-19 pandemic, the focus of healthcare providers and
hospitals on fighting the virus, and consistent with the FDA’s industry guidance for conducting clinical trials issued in March
2020, as updated subsequently. We and our CROs have also made certain adjustments to the operation of such trials in an effort to ensure
the monitoring and safety of patients and minimize risks to trial integrity during the pandemic in accordance with the guidance issued
by the FDA on June 19, 2020 on good manufacturing practice considerations for responding to COVID-19 infection in employees in biopharmaceutical
products manufacturing and generally and may need to make further adjustments in the future. Other COVID-related guidance recently released
by FDA that apply to us and our third-party manufacturers include guidance addressing cGMP considerations for responding to COVID-19 infections
in employees and statistical considerations for clinical trials during the COVID-19 public health emergency. Many of these adjustments
are new and untested, may not be effective, and may have unforeseen effects on the enrollment, progress and completion of these trials
and the findings from these trials. While we are currently continuing our clinical trial and seeking to add new clinical trial sites,
we may not be successful in adding trial sites, may experience delays in patient enrollment or in the progression of our clinical trial,
may need to suspend our clinical trial, and may encounter other negative impacts to our trials, due to the effects of the COVID-19 pandemic.
The global outbreak of COVID-19 continues to rapidly
evolve. The extent to which the COVID-19 pandemic impacts our business will depend on future developments such as the rate of the spread
of the disease, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions
and the effectiveness of actions taken in the United States and other countries to contain and treat the disease and to address its impact,
including on financial markets or otherwise. Further, a lack of coordinated response on risk mitigation and vaccination deployment with
respect to the COVID-19 pandemic on a local or federal level could result in significant increases to the duration and severity of the
pandemic in the United States as compared to the rest of the world and could have a corresponding negative impact on our business. While
the extent of the impact of the current COVID-19 pandemic on our business and financial results is uncertain, a continued and prolonged
public health crisis such as the COVID-19 pandemic could have a material negative impact on our business, financial condition and operating
results.
To the extent the COVID-19 pandemic adversely
affects our business, financial condition and operating results, it may also have the effect of heightening many of the risks described
in this “Risk Factors” section.
The Company and its subsidiaries have limited
insurance for their operations and are subject to various risks of loss.
The Company and its subsidiaries carry limited
directors’ and officers’ insurance with a high deductible. In addition, we do not carry general business liability insurance
or other insurance applicable to our business. Successful claims against the Company would likely render us insolvent. The Company has
not reserved any amounts in connection with self-insuring against any potential claims against the Company or its subsidiaries. Once we
are able to raise sufficient funding to advance our business, we plan to secure additional insurance coverage to better protect our business.
There can no assurance that we will obtain sufficient insurance coverage to cover all possible risks and potential related losses.
Drug development involves a lengthy and expensive process with an
uncertain outcome, including failure to demonstrate safety and efficacy to the satisfaction of the FDA or similar regulatory authorities
outside the United States. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the
product manufacturing of our product candidates.
Given the early stage of development for both
product candidates, the risk of failure for our product candidates is high. Before obtaining marketing approval from regulatory authorities
for the sale of any product candidate, we must complete formulation development for our products, conduct nonclinical trials, and then
conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. In addition, product manufacturing
and process development along with preclinical and clinical testing are all expensive activities, difficult to design and implement, and
can take several years to complete. The outcome of preclinical and clinical trials is inherently uncertain. Failure can occur at any time
during the development program, including during the clinical trial process. Further, the results of preclinical studies and early clinical
trials of our product candidates, may not be predictive of the results of later-stage clinical trials. Moreover, preclinical and clinical
data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed
satisfactorily in preclinical and clinical trials have nonetheless failed to obtain marketing approval of their products. It is impossible
to predict when or if any of our product candidates will prove effective and safe in humans or will receive regulatory approval.
We may experience delays in our planned clinical
trials, and we do not know whether planned clinical trials will begin or enroll subjects on time, need to be redesigned or be completed
on schedule, if at all. There can be no assurance that the FDA or any other foreign regulatory body will not put any of our product candidates
on clinical hold in the future. We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay
or prevent our ability to receive marketing approval or commercialize our product candidates. Planned clinical trials may be delayed,
suspended or prematurely terminated for a variety of reasons, such as:
| · | delay or failure in reaching agreement with the
FDA, European Medicines Agency (“EMA”), or a comparable foreign regulatory authority on a trial design that we want to execute; |
| · | delay or failure in obtaining authorization to
commence a trial or inability to comply with conditions imposed by a regulatory authority regarding the scope or design of a clinical
study; |
| · | delays in reaching, or failure to reach, agreement
on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites; |
| · | inability, delay, or failure in identifying and
maintaining a sufficient number of trial sites, many of which may already be engaged in other clinical programs; |
| · | delay or failure in recruiting and enrolling
suitable subjects to participate in a trial; |
| · | delay or failure in having subjects complete
a trial or return for post-treatment follow-up; |
| · | clinical sites and investigators deviating from
trial protocol, failing to conduct the trial in accordance with regulatory requirements, or dropping out of a trial; |
| · | lack of adequate funding to continue the clinical
trial, including the incurrence of unforeseen costs due to enrollment delays, requirements to conduct additional clinical studies and
increased expenses associated with the services of our contract research organizations (“CROs”) and other third parties; |
| · | clinical trials of our product candidates may
produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon
product development programs; |
| · | the number of patients required for clinical
trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate,
or participants may drop out of these clinical trials at a higher rate than we anticipate; |
| · | we may experience delays or difficulties in the
enrollment of patients that our product candidates are designed to target based on the inclusion and exclusion criteria; |
| · | our third-party contractors may fail to comply
with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; |
| · | we may have difficulty partnering with experienced
Clinical Research Organization and study sites that can identify patients that our product candidates are designed to target and run our
clinical trials effectively; |
| · | regulators or institutional review boards (“IRBs”)
may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory
requirements or a finding that the participants are being exposed to unacceptable health risks; |
| · | the supply or quality of our product candidates
or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; or |
| · | there may be changes in governmental regulations
or administrative actions. |
If we are required to conduct additional clinical
trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete
clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly
positive, or if there are safety concerns, we may:
| · | be delayed in obtaining marketing approval for
our product candidates, if ever; |
| · | obtain approval for indications or patient populations
that are not as broad as intended or desired; |
| · | obtain approval with labeling that includes significant
use or distribution restrictions or safety warnings that would reduce the potential market for our products or inhibit our ability to
successfully commercialize our product candidates; |
| · | be subject to additional post-marketing restrictions
and/or testing requirements; or |
| · | have the product removed from the market after
obtaining marketing approval. |
Product development costs will also increase if
we experience delays in testing or marketing approvals. We do not know whether any of our preclinical studies or clinical trials will
need to be restructured or will be completed on schedule, or at all. Significant preclinical or clinical trial delays also could shorten
any periods during which we may have the exclusive right to commercialize our product candidates or may allow our competitors to bring
products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business
and results of operations. In addition, enrollment delays in our clinical trials may result in increased development costs for our product
candidates, which would cause the value of the Company to decline and limit our ability to obtain additional financing.
If serious adverse events or unacceptable side
effects are identified during the development of our product candidates, we may need to abandon or limit our development of some of our
product candidates.
If our product candidates are associated with
undesirable effects in preclinical or clinical trials or have characteristics that are unexpected, we may need to interrupt, delay or
abandon their development or limit development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics
are less prevalent, less severe or more acceptable from a risk-benefit perspective. Currently unknown, drug-related side effects may be
identified in our planned clinical studies and, as such, these possible drug-related side effects could affect patient recruitment, the
ability of enrolled subjects to complete the trial, or result in potential product liability claims. Reported serious adverse events may
arise and the occurrence, whatever the cause, may impact the conduct of any ongoing or future clinical trial. To date, our product candidates
have not been evaluated in any human clinical studies. Any occurrence of clinically significant adverse events may harm our business,
financial condition and prospects significantly.
Our business and operations would suffer in
the event of computer system failures, cyber-attacks or deficiencies in our or third parties’ cyber security.
Given our limited operating history, we are still
in the process of implementing our internal security measures. Our internal computer systems and those of current and future third parties
on which we rely may fail and are vulnerable to damage from computer viruses and unauthorized access. Our information technology and other
planned internal infrastructure systems, including corporate firewalls, servers, connection to the Internet, face the risk of systemic
failure that could disrupt our operations. If such an event were to occur and cause interruptions in our operations, it could result in
a material disruption of our development programs and our business operations. To the extent that any disruption or security breach were
to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information,
we could incur liability, our competitive position could be harmed and the further development and commercialization of our product candidates
or any future product candidates could be hindered or delayed. In addition, due to limited corporate infrastructure, our entire workforce
is currently working remotely. This could increase our cyber security risk, create data accessibility concerns, and make us more susceptible
to communication disruptions.
We do not presently maintain insurance coverage
to protect against cybersecurity risks. If we procure such coverage in the future, we cannot ensure that it will be sufficient to cover
any loss we may experience as a result of such cyberattacks. Any cyber incident could have a material adverse effect on our business,
financial condition, and results of operations.
If we fail to establish and maintain proper
and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.
Ensuring that we will have adequate internal financial
and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and
time-consuming effort that needs to be re-evaluated frequently. Internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with Generally
Accepted Accounting Principles or GAAP.
In addition, we are required to be compliant with
public company internal control requirements mandated under Section 302 and 906 of the Sarbanes-Oxley Act. If we are unable to successfully
maintain internal controls over financial reporting, the accuracy and timing of our financial reporting, and our stock price, may be adversely
affected.
Risks
Related to Our Financial Position and Need for Additional Capital
We will need substantial additional funding.
If we are unable to raise capital when needed, we would be compelled to delay, reduce or eliminate our product development programs or
commercialization efforts.
We expect our expenses to significantly increase
in parallel with our ongoing activities, particularly as we initiate product manufacturing to support preclinical and clinical testing,
preclinical studies, including toxicology studies, clinical development, and eventually, if successful, seek marketing approval for, our
product candidates. If we are unable to raise capital when needed or on attractive terms, we would be forced to further delay our preclinical
and clinical development programs or any future commercialization efforts.
Based upon current operating plans, our current
working capital is insufficient to fund our operations for the next twelve months. We will require additional capital to support our development
plans and eventually the commercialization of our product candidates, if approved, and may also need to raise additional funds to pursue
other development activities related to additional product candidates. Our funding needs may fluctuate significantly based on several
factors, including, but not limited to:
| · | the scope, progress, results and costs of product
development and manufacture of drug product to support preclinical and clinical development of our product candidates; |
| · | the extent to which we enter into additional
collaboration arrangements regarding product discovery or development; |
| · | the costs, timing and outcome of regulatory review
of our product candidates; |
| · | our ability to establish additional collaborations
with favorable terms, if at all; |
| · | the costs of future commercialization activities,
including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval; |
| · | the costs of preparing, filing and prosecuting
patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; |
| · | The costs to in-license our product candidates from Case Western Reserve
University, and others if we acquire or in-license other products or technologies; and |
| · | revenue, if any, received from commercial sales of our product candidates,
should any of our product candidates receive marketing approval. |
Identifying potential product candidates and conducting
manufacturing and process development, preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that
takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product
sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be
derived from sales of products that we do not expect to be commercially available for several years, if at all. Accordingly, we will need
to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to
us on acceptable terms, or at all.
Raising capital will cause dilution to our
stockholders, restrict our operations, or require us to relinquish rights to our technologies or product candidates.
Until such time, if ever, as we can generate substantial
product revenues, we expect to finance our cash needs through a combination of equity offerings and/or debt financings. We do not have
any committed external source of funds. To the extent that we raise additional capital through the sale of equity and/or debt securities,
the ownership interest of common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences
that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements
that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital
expenditures, or restricting the use of proceeds for only certain operational activities.
We cannot be certain that additional funding will
be available on acceptable terms, or at all. If we are unable to raise additional funds when needed, we may be required to delay, limit,
reduce or terminate our product development or future commercialization efforts.
Because the Reverse Merger resulted in an ownership
change under Section 382 of the Internal Revenue Code for PTSC, PTSC’s pre-merger net operating loss carryforwards and certain
other tax attributes may be subject to limitations.
If a corporation undergoes an “ownership
change” within the meaning of Section 382 of the Code, the corporation’s net operating loss carryforwards and certain other
tax attributes arising from before the ownership change are subject to limitations on use after the ownership change. In general, an ownership
change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds 50 percentage
points over a rolling three-year period. Similar rules may apply under state tax laws. The Reverse Merger resulted in an ownership change
for PTSC and, accordingly, PTSC’s net operating loss carryforwards and certain other tax attributes may be subject to limitations
(or disallowance) on their use after the Reverse Merger. Additional ownership changes in the future could result in additional limitations
on the Company’s post-merger net operating loss carryforwards. Consequently, even if the Company achieves profitability, it may
not be able to utilize a material portion of PTSC’s, or the post-merger Company’s net operating loss carryforwards and other
tax attributes, which could have a material adverse effect on cash flow and results of operations.
Risks
Related to the Commercialization of Our Product Candidates
We face substantial competition, which may
result in others discovering, developing or commercializing competing products before or more successfully than we do.
The development and commercialization of new drug
products is highly competitive. We face competition with respect to our current product candidates, and will face competition with respect
to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical
companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently
market and sell products or are pursuing the development of products for the treatment of the disease indications for which we are developing
our product candidates. Some of these competitive products and therapies are based on scientific approaches in immuno-oncology that are
similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions,
government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative
arrangements for research, development, manufacturing and commercialization.
Our commercial opportunity could be reduced or
eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects,
are more convenient or are less expensive than any products that we may develop. In addition, our ability to compete may be affected in
many cases by insurers or other third-party payers seeking to encourage the use of biosimilar or generic products.
Many of the companies against which we are competing
or against which we may compete in the future have significantly greater financial resources and expertise in research and development,
manufacturing, conducting preclinical studies, conducting clinical trials, obtaining regulatory approvals and marketing approved products
than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated
among a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining
qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well
as in acquiring technologies complementary to, or necessary for, our programs.
Product liability lawsuits against us could
cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.
We will face an inherent risk of product liability
exposure related to the testing of our product candidates in human clinical trials and will face an even greater risk if we commercially
sell any products that we may develop. If we cannot successfully defend against claims that our product candidates or products caused
injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
| · | decreased demand for any product candidates or
products that we may develop, if approved; |
| · | injury to our reputation and significant negative
media attention; |
| · | withdrawal of clinical trial participants; |
| · | significant costs to defend the related litigation; |
| · | substantial monetary awards to trial participants
or patients; |
| · | loss of revenue, if approved; |
| · | reduced resources of our management to pursue
our business strategy; and |
| · | the inability to commercialize any products that
we may develop. |
We currently have no product liability insurance
coverage as our product candidates are not ready for clinical testing in patients. When we secure product liability insurance, it may
not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage as we expand our clinical trials
or if we commence commercialization of our product candidates. Insurance coverage is increasingly expensive. We may not be able to maintain
insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
Risks Related to Our Dependence
on Third Parties
Future development collaborations may be important
to us. If we are unable to enter into or maintain these collaborations, or if these collaborations are not successful, our business could
be adversely affected.
For any of our product candidates, we may in the
future determine to seek to collaborate with pharmaceutical and biotechnology companies for development of our product candidates. We
face significant competition in seeking appropriate collaborators. Our ability to reach a definitive agreement for any collaboration will
depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed
collaboration and the proposed collaborator’s evaluation of a number of factors. If we are unable to reach agreements with suitable
collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce
or delay its development program or one or more of our other potential development programs, delay its potential development schedule
or reduce the scope of research activities, or increase our expenditures and all development activities at our own expense. If we fail
to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development activities, we may not
be able to further develop our product candidates or continue to develop our product candidates, and our business may be materially and
adversely affected.
If any future collaboration does not result in
the successful development of products or product candidates, product candidates could be delayed, and we may need additional resources
to develop product candidates. All of the risks relating to product development, regulatory approval and commercialization described in
this periodic report also apply to the activities of our collaborators.
We may contract with third parties for the
manufacture of our product candidates for preclinical and clinical studies and may expect to continue to do so for commercialization.
This potential reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products
at an acceptable cost and quality, which could delay, prevent or impair our development or commercialization efforts.
Due to our limited operations and no existing
manufacturing infrastructure or capabilities, we may utilize third parties to formulate, manufacture, package, and distribute preclinical
and clinical supplies of our product candidates. In addition, these materials are custom-made and available from only a limited number
of sources. Despite drug substance and product risk management, this reliance on third parties presents a risk that we will not have sufficient
quantities of our product candidates or products or such quantities at an acceptable cost or quality, which could delay, prevent or impair
our development or commercialization efforts. Any performance failure on the part of our future manufacturers of drug substance or drug
products could delay clinical development or potential marketing approval.
We also expect to rely on other third parties
to label, store, and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay
clinical development or marketing approval of our product candidates or commercialization of our products, producing additional losses
and depriving us of potential product revenue.
We may be unable to establish any agreements with
third-party manufacturers or to do so on acceptable terms. Even if we can establish agreements with third-party manufacturers, reliance
on third-party manufacturers entails additional risks, including:
| · | reliance on the third party for regulatory compliance
and quality assurance; |
| · | the possible breach of the manufacturing agreement
by the third party; |
| · | the possible misappropriation of our proprietary
information, including our trade secrets and know-how; and |
| · | the possible termination or nonrenewal of the
agreement by the third party at a time that is costly or inconvenient for us. |
The third parties we may rely on for manufacturing
and packaging are also subject to regulatory review, and any regulatory compliance problems with these third parties could significantly
delay or disrupt our clinical or commercialization activities. Third-party manufacturers may not be able to comply with cGMP regulations
or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply
with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties,
delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions
and criminal prosecutions, any of which could significantly and adversely affect supplies of our products. Additionally, macro-economic
conditions may adversely affect these third parties, causing them to suffer liquidity or operational problems. If a key third-party vendor
becomes insolvent or is forced to lay off workers assisting with our projects, our results and development timing could suffer.
In addition, our product candidate, and any products
that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited
number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us. Our anticipated future
dependence upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our
ability to commercialize any products that receive marketing approval on a timely and competitive basis.
Data provided by collaborators and other parties
upon which we rely have not been independently verified and could turn out to be inaccurate, misleading, or incomplete.
We rely and intend to rely on third-party vendors,
scientists, and collaborators to provide us with significant data and other information related to our projects, clinical trials, and
business. We do not independently verify or audit all of such data (including possibly material portions thereof). As a result, such data
may be inaccurate, misleading, or incomplete.
Risks
Related to Our Intellectual Property
If we or CWRU are unable to obtain and maintain
intellectual property protection for technology and products under the License Agreement or if the scope of the intellectual property
protection obtained by CWRU is not sufficiently broad, our competitors could develop and commercialize technology and products similar
or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.
Our success depends in large part on our ability
and CWRU’s ability to obtain and maintain patent protection in the United States, the European Union, and other countries with respect
to our proprietary technology and products. We or CWRU have and will seek to protect our proprietary position by filing patent applications
in the United States and internationally that are related to our novel technologies and product candidates. We currently heavily rely
on CWRU to assist with protecting the underlying patents and patent applications under the License Agreement.
The patent prosecution process is expensive and
time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in
a timely manner. We or CWRU may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection
in certain jurisdictions, and under the laws of certain jurisdictions, patents or other intellectual property rights may be unavailable
or limited in scope. It is also possible that we or CWRU will fail to identify patentable aspects of our discovery and preclinical development
output before it is too late to obtain patent protection. Moreover, in some circumstances, we may not have the right to control the preparation,
filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. Therefore,
these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
The patent position of biotechnology and pharmaceutical
companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much
litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States.
Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United
States and other jurisdictions are typically not published until 18 months after filing, or in limited cases not at all. Therefore, we
cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent
applications, or that we were the first to file for patent protection of such inventions. Also, examination is often lengthy and can involve
numerous challenges to the claims sought. As a result, the issuance, scope, validity, enforceability and commercial value of our patent
rights are highly uncertain. Pending and future patent applications may not result in patents being issued which protect our technology
or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes
in either the patent laws or interpretation of the patent laws in the United States, the European Union, and other countries may diminish
the value of the underlying patents under our License Agreement or narrow the scope of our patent protection.
Any inability by us or CWRU to protect adequately
the underlying intellectual property covered by the License Agreement may have a material adverse effect on our business, operating results,
and financial position.
If we fail to comply with our obligations in
the License Agreement with CWRU or other agreements under which we may license intellectual property and other rights from third parties
or otherwise experience disruptions to our business relationships with our future licensors, we could lose the option to license those
rights or other rights that are important to our business.
On July 1, 2020, we signed a License Option Agreement
with CWRU, granting us the exclusive right to license technology and patent portfolios concerning certain immunostimulatory nanotechnology-based
therapeutics and formulations to treat cancer and diseases in humans and for veterinary use. On May 4, 2022, exercised our right to license
the technology from CWRU and entered into a License Agreement. If we fail to comply with our obligations under the License Agreement,
or any other future agreement, we may lose the rights to developed and potentially commercialize our technology, and CWRU may have the
right to terminate the License Agreement or restrict our rights, in which event we would not be able to develop or market products covered
by the License Agreement, which are the products upon which our business depends. Additionally, all milestones and other payments associated
with this License Agreement will make it less profitable for us to develop our drug candidates than if we had developed the licensed technology
internally.
Also, patent prosecution under the License Agreement
is controlled by CWRU. If CWRU fails to obtain and maintain patent or other protection for the proprietary intellectual property we plan
to license from them, we could lose our rights to the intellectual property or our exclusivity with respect to those rights, and our competitors
could market competing products using the intellectual property. If disputes over intellectual property and other rights that we have
licensed or plan to license prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be
unable to successfully develop and commercialize the affected product candidates.
We may become involved in lawsuits to protect
or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.
Because competition in our industry is intense,
competitors may infringe or otherwise violate our rights to patents of our licensors or other intellectual property. To counter infringement
or unauthorized use, we or CWRU may be required to file infringement claims, which can be expensive and time-consuming. Any claims we
assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents.
In addition, in a patent infringement proceeding, a court may decide that a patent of ours or CWRU is invalid or unenforceable, in whole
or in part, construe the patent’s claims narrowly, or refuse to stop the other party from using the technology at issue on the grounds
that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our
patents at risk of being invalidated or interpreted narrowly. We may also elect to enter into license agreements in order to settle patent
infringement claims or to resolve disputes prior to litigation, and any such license agreements may require us to pay royalties and other
fees that could be significant. Furthermore, because of the substantial amount of discovery required in connection with intellectual property
litigation, there is a risk that some of our confidential information could be compromised by disclosure.
We may need to license certain intellectual
property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.
A third party may hold intellectual property,
including patent rights, that are important or necessary to the development of our products. It may be necessary for us to use the patented
or proprietary technology of third parties to commercialize our products, in which case, we would be required to obtain a license from
these third parties on commercially reasonable terms, or our business could be harmed, possibly materially. If we were not able to obtain
a license, or we are not able to obtain a license on commercially reasonable terms, our business could be harmed, possibly materially.
Third parties may initiate legal proceedings
alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material
adverse effect on the success of our business.
Our commercial success depends upon our ability,
and the ability of our licensors and collaborators, to develop, manufacture, market and sell our product candidates and use our proprietary
technologies without infringing the proprietary rights of third parties. There is considerable intellectual property litigation in the
biotechnology and pharmaceutical industries. We may become party to, or threatened with, future adversarial proceedings or litigation
regarding intellectual property rights with respect to our products and technology, including proceedings challenging validity before
the United States Patent and Trademark Office (“USPTO”) and/or European Patent Office (“EPO”). Third parties may
assert infringement claims against us or CWRU based on existing patents or patents that may be granted in the future.
If we are found to infringe a third party’s
intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our
products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if
we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to
us. We could be forced, including by court order, to cease commercializing any infringing technology or product. In addition, we could
be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a
patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business
operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets
of third parties could have a similar negative impact on our business.
If we are unable to protect the confidentiality
of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patents for some of our
technology and product candidates, we also plan to rely on trade secrets, including unpatented know-how, technology and other proprietary
information, to maintain our competitive position. Any NDAs or similar agreements entered into by the Company may not be with all relevant
parties, or adequately protect the confidentiality of our trade secrets. Moreover, to the extent we enter into such agreements, any of
these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able
to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is
difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States
are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed
by a competitor, we would have no right to prevent them, or those to whom they communicate them, from using that technology or information
to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position
would be harmed.
Risks
Related to Our Employee Matters, Managing Growth and Macroeconomic Conditions
Our future success depends on our ability to
attract, hire, retain and motivate executives, key employees, and our general workforce.
We are highly dependent on the product development,
clinical and business development expertise of the principal members of our management, scientific and clinical teams. Although we have
entered into offer letters with our executives and employees, each of them may terminate their employment with us at any time. We do not
maintain “key person” insurance for any of our executives or other employees.
In addition, our business plan relies significantly
on the continued services of our President and Chief Executive Officer, Steven King. If we were to lose his services, including through
death or disability, our ability to continue to execute our business plan would be materially impaired. The Company has not entered into
an employment agreement with Mr. King, or any other officer of the Company.
Recruiting and retaining qualified scientific,
clinical, regulatory, and manufacturing personnel is critical to our success. Due to the small size of the Company and the limited number
of employees, each of our executives and key employees serves in a critical role. The loss of the services of our executive officers or
other key employees could impede the achievement of our development objectives and seriously harm our ability to successfully implement
our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of
time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop,
gain regulatory approval of, and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to
hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology
companies for similar personnel. We also may experience competition for the hiring of scientific and clinical personnel from universities
and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us
in product manufacturing, preclinical development, clinical development, regulatory strategy, and commercial strategy. Our consultants
and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities
that may limit their availability to provide services to us. If we are unable to continue to attract and retain high quality personnel,
our ability to pursue our development strategy will be limited.
We expect to expand our research and development
function, as well as our corporate operations, and as a result, we may encounter difficulties in managing our growth, which could disrupt
our operations.
We expect to experience significant growth in
the number of our employees and the scope of our operations, particularly in the areas of product manufacturing, preclinical research,
clinical development, and regulatory affairs, as capital resources become available. To manage our anticipated future growth, we must
also implement and improve our managerial, operational and financial systems, identify new facilities and continue to recruit and train
additional qualified personnel. Due to our limited financial resources, we may not be able to effectively manage the expansion of our
operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may
divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans
or disrupt our operations.
We may face risks related to securities litigation
that could result in significant legal expenses and settlement or damage awards.
We may in the future become subject to claims
and litigation alleging violations of the securities laws or other related claims, which could harm our business and require us to incur
significant costs. We are generally obliged, to the extent permitted by law, to indemnify our current and former directors and officers
who are named as defendants in these types of lawsuits. Regardless of the outcome, litigation may require significant attention from management
and could result in significant legal expenses, settlement costs or damage awards that could have a material impact on our financial position,
results of operations and cash flows.
Risks
Related to Our Common Stock
Our common stock is quoted on the OTCQB tier
of the OTC Markets, which could adversely affect the market price and liquidity of our common stock.
Our common stock is quoted on OTCQB tier of the
OTC Markets. The quotation of our shares on such marketplace may result in a less liquid market available for existing and potential stockholders
to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on
our ability to raise capital in the future.
There can be no assurance that there will be an
active market for our shares of common stock either now or in the future or that stockholders will be able to liquidate their investment
or liquidate it at a price that reflects the value of the business. As a result, our stockholders may not find purchasers for our securities
should they to desire to sell them.
If we fail to meet the eligibility requirements
of OTCQB, we could be removed from the OTCQB which would limit the ability of broker-dealers to sell our securities in the secondary market.
The companies whose securities are quoted on the
OTCQB Venture Market must maintain certain eligibility criteria, including having a minimum bid price for of $0.01, having at least 50
beneficial shareholders owning at least 100 shares of common stock, a public float of at least 10% of total issued and outstanding shares
of common stock, as defined by OTC Markets, current in the payment of annual fees and certifications, among other requirements as defined
by the OTC Markets, to continue to be quoted on the OTCQB. There is no guarantee that we will continue to meet OTCQB criteria
to continue to have our common stock be quoted thereon. As a result, failure to be quoted on the OTCQB would cause the Company’s
common stock to be quoted on the OTC Pink Open Market, which may severely adversely affect the market liquidity for our shares by limiting
the ability of broker-dealers to sell such shares, and the ability of stockholders to sell their shares in the secondary market. In addition,
if we are no longer quoted on the OTCQB, there can be no assurance that will meet the eligibility criteria and requalify for quotation
on the OTCQB.
Although our stock is quoted on the OTCQB,
we could subsequently be removed from the OTCQB if we fail to remain current with our financial reporting requirements.
Companies trading on the OTCQB must be reporting
issuers under Section 12 of the Exchange Act and must be current in their reports under Section 13 in order to maintain price quotation
privileges on the OTCQB. If we fail to remain current in our reporting requirements, we would be removed from the OTCQB. As a result,
the market liquidity of our securities could be severely adversely affected by limiting the ability of broker-dealers to trade our securities
and the ability of stockholders to sell their securities in the secondary market.
Our Board has discretionary authority to implement
a Discretionary Reverse Stock Split at a ratio ranging from 1-for-2 to 1-for-4 at any time on or before June 25, 2022.
There are several risks associated with the Discretionary
Reverse Stock Split, including that the Discretionary Reverse Stock Split may not result in a sustained increase in the per share price
of our common stock. There is no assurance that:
| · | the market price per share of the common stock
after the Discretionary Reverse Stock Split will rise in proportion to the reduction in the number of shares of the common stock outstanding
before the Discretionary Reverse Stock Split; |
| · | the Discretionary Reverse Stock Split will result
in a per share price that will attract brokers and investors who do not trade in lower priced stocks; |
| · | the Discretionary Reverse Stock Split will result
in a per share price that will increase our ability to attract and retain employees and other service providers; and |
| · | The Discretionary Reverse Stock Split will result
in a sustained per share price that meets the initial listing requirements of Nasdaq. |
Stockholders should note that the effect of the
Discretionary Reverse Stock Split, if any, upon the market price for the common stock cannot be accurately predicted. In particular, we
cannot assure you that prices for shares of the common stock after the Discretionary Reverse Stock Split will be two (2) to four (4) times,
as applicable, the prices for shares of the common stock immediately prior to the Discretionary Reverse Stock Split. Furthermore, even
if the market price of the common stock does rise following the Discretionary Reverse Stock Split, we cannot assure you that the market
price of the common stock immediately after the proposed Discretionary Reverse Stock Split will be maintained for any period of time.
Even if an increased per-share price can be maintained, the Discretionary Reverse Stock Split may not achieve the desired results of listing
our common stock on The Nasdaq Stock Market. Moreover, because some investors may view the reverse stock split negatively, we cannot assure
you that the reverse stock split will not adversely impact the market price of the common stock.
The market price of the common stock will also
be based on our performance and other factors, some of which are unrelated to the Discretionary Reverse Stock Split or the number of shares
outstanding. If the reverse stock split is effected and the market price of the common stock declines, the percentage decline as an absolute
number and as a percentage of our overall market capitalization may be greater than would occur in the absence of a reverse stock split.
The total market capitalization of the common stock after implementation of the Discretionary Reverse Stock Split when and if implemented
may also be lower than the total market capitalization before the Discretionary Reverse Stock Split. Furthermore, the liquidity of the
common stock could be adversely affected by the reduced number of shares that would be outstanding after the Discretionary Reverse Stock
Split.
While we aim that the reverse stock split will
be sufficient to obtain our listing on the Nasdaq Stock Market, it is possible that, even if the Discretionary Reverse Stock Split results
in a bid price for the common stock that exceeds the required price per share, another reverse split may be necessary in the future and
we may not be able to continue to satisfy the other criteria for continued listing of the common stock on the Nasdaq Stock Market.
In addition, the Discretionary Reverse Stock Split
may result in some stockholders owning “odd lots” of less than 100 shares of common stock. Odd lot shares may be more difficult
to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than the costs of transactions
in “round lots” of even multiples of 100 shares.
The market for our common stock is subject
to rules relating to low-priced stock (“Penny Stock”) which may limit our ability to raise capital.
Our common stock is currently subject to the “penny
stock rules” adopted pursuant to Section 15(g) of the Exchange Act. In general, the penny stock rules apply to non-NASDAQ or non-national
stock exchange companies whose common stock trades at less than $5.00 per share or which have tangible net worth of less than $5,000,000
($2,000,000 if the company has been operating for three or more years). Such rules require, among other things, that brokers who trade
“penny stock” on behalf of persons other than “established customers” complete certain documentation, make suitability
inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure
document, quote information, broker’s commission information and rights and remedies available to investors in penny stocks. Many
brokers have decided not to trade “penny stock” because of the requirements of the penny stock rules, and as a result, the
number of broker-dealers willing to act as market makers in such securities is limited. The “penny stock rules,” therefore,
may have an adverse impact on the market for our common stock and may affect our ability to raise additional capital.
FINRA sales practice requirements may limit
a stockholder’s ability to buy and sell our common stock.
The Financial Industry Regulatory Authority, or
FINRA, has adopted rules requiring that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to recommending speculative or low-priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status,
investment objectives and other information. Under interpretations of these rules, FINRA has indicated its belief that there is a high
probability that speculative or low-priced securities will not be suitable for at least some customers. If these FINRA requirements are
applicable to us or our securities, they may make it more difficult for broker-dealers to recommend that at least some of their customers
buy our common stock, which may limit the ability of our stockholders to buy and sell our common stock and could
have an adverse effect on the market for and price of our common stock.
Future sales of shares by existing stockholders
could cause the Company’s stock price to decline.
If existing stockholders of the Company sell,
or indicate an intention to sell, substantial amounts of the Company’s common stock in the public market after the Reverse Merger,
the trading price of the common stock of the combined company could decline. Pursuant to the Reverse Merger, shareholders of Private Mosaic
owned 90% of the fully diluted shares of common stock outstanding as of the closing date, on an as-converted basis. In addition, our shareholders
are not restricted in the price at which they can sell their shares. Shares sold at a price below the current market price at which our
common stock is trading may cause the market price of our common stock to decline.
We expect our stock price to be volatile, and the market price of
our common stock may drop unexpectedly.
The market price of our common stock could be
subject to significant fluctuations. For instance, during the year ended December 31, 2021, the low and high trading prices of our common
stock has ranged from $0.10 to $5.00 per share. Market prices for securities of early-stage pharmaceutical, biopharmaceutical, and other
life sciences companies have historically been particularly volatile.
Some of the factors that may cause the market
price of our common stock to fluctuate include:
| · | results from preclinical testing and clinical
trial results, and our ability to obtain regulatory approvals for our product candidates, and delays or failures to obtain such approvals; |
| · | issues in manufacturing our product candidates; |
| · | the entry into, or termination of, key agreements,
including our License Agreement with CWRU and any future license agreement; |
| · | the initiation of, material developments in,
or conclusion of litigation to enforce or defend any of the underlying intellectual property rights under the License Agreement or defend
against the intellectual property rights of others; |
| · | announcements by competitors of new commercial
products, clinical progress or the lack thereof, significant contracts, or commercial relationships; |
| · | the introduction of technological innovations
or new therapies that compete with our potential products; |
| · | the loss of key employees; |
| · | general and industry-specific economic conditions
that may affect our research and development expenditures; |
| · | changes in the structure of healthcare payment
systems; and |
| · | issuance of new shares of common stock from raising
additional capital, which may not be available on acceptable terms, or at all; and |
| · | period-to-period fluctuations in our financial
results. |
Moreover, the stock markets in general have experienced
substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations
may also adversely affect the trading price of our common stock.
In the past, following periods of volatility in
the market price of a company’s securities, stockholders have often instituted class action securities litigation against those
companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which
could significantly harm our financial position.
Our share price could decline as a result of
short sales.
When an investor sells stock that he does not
own, it is known as a short sale. The seller, anticipating that the price of the stock will go down, intends to buy stock to cover his/her
sale at a later date. If the price of the stock goes down, the seller will profit to the extent of the difference between the price at
which he originally sold it less his later purchase price. Short sales enable the seller to profit in a down market. Short sales could
place significant downward pressure on the price of our common stock. Penny stocks which do not trade on an exchange, such as our common
stock, are particularly susceptible to short sales.
We may issue preferred stock, and the terms
of such preferred stock may reduce the value of our common stock.
We are authorized to issue up to a total of 5,000,000
shares of preferred stock in one or more series, of which, 4,300,000 have been undesignated as of March 31, 2022. Our Board of Directors
may determine whether to issue shares of preferred stock without further action by holders of our common stock. If we issue shares of
preferred stock, it could affect the rights or reduce the value of our common stock. In particular, specific rights granted to future
holders of preferred stock could be used to restrict our ability to merge with or sell our assets to a third party. These terms may include
voting rights, preferences as to dividends and liquidation, conversion and redemption rights, and sinking fund provisions. As we seek
capital for our business, such capital may be raised through the issuance of preferred stock.
Our executive officers, directors and principal
stockholders, if they choose to act together, will have the ability to control all matters submitted to stockholders for approval.
Shareholders of Private Mosaic beneficially own
shares representing approximately 90% of our capital stock, on an as-converted basis. As a result, if these stockholders were to choose
to act together, they would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs.
For example, these persons, if they choose to act together, would control the election of directors and approval of any merger, consolidation
or sale of all or substantially all of our assets. This concentration of ownership control may:
| · | delay, defer or prevent a change in control; |
| · | entrench our management and the board of directors;
or |
| · | impede a merger, consolidation, takeover or other
business combination involving the Company that other stockholders may desire. |
Our amended and restated certificate of incorporation
and amended and restated bylaws provides that state or federal court located within the state of Delaware will be the sole and exclusive
forum for substantially all disputes between us and our stockholders, which could limit its stockholders’ ability to obtain a favorable
judicial forum for disputes with us or our directors, officers or other employees.
Section XIV of our amended and restated certificate
of incorporation provides that “Unless the Corporation consents in writing to the selection of an alternative forum, the Court of
Chancery of the State of Delaware shall, to the fullest extent permitted by applicable law, be the sole and exclusive forum for any stockholder
(including a beneficial owner) to bring (A) any derivative action or proceeding brought on behalf of the Corporation, (B) any action asserting
a claim of breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s
stockholders, (C) any action asserting a claim against the Corporation, its directors, officers or employees or agents arising pursuant
to any provision of the DGCL, this Amended and Restated Certificate of Incorporation or the Corporation’s bylaws, or (D) any action
asserting a claim against the Corporation, its directors, officers or employees or agents governed by the internal affairs doctrine, except
as to each of (A) through (D) above, for any claim as to which the Court of Chancery determines that there is an indispensable party not
subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the
Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other
than the Court of Chancery, or over which the Court of Chancery does not have subject matter jurisdiction. To the fullest extent permitted
by law, any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed
to have notice of and consented to the provisions of this Article XIV.”
The exclusive forum provision in our amended and
restated certificate of incorporation and amended and restated bylaws will not relieve us of our duty to comply with the federal securities
laws and the rules and regulations thereunder, and shareholders will not be deemed to have waived our compliance with these laws, rules
and regulations. This exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing
for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us or our directors, officers
or other employees. In addition, shareholders who do bring a claim in the state or federal court in the State of Delaware could face additional
litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. The state or federal court of the
State of Delaware may also reach different judgments or results than would other courts, including courts where a shareholder would otherwise
choose to bring the action, and such judgments or results may be more favorable to us than to our shareholders. However, the enforceability
of similar exclusive forum provisions in other companies’ certificates of incorporation have been challenged in legal proceedings,
and it is possible that a court could find this type of provision to be inapplicable to, or unenforceable in respect of, one or more of
the specified types of actions or proceedings. If a court were to find the exclusive forum provision contained in our amended and restated
certificate of incorporation to be inapplicable or unenforceable in an action, we might incur additional costs associated with resolving
such action in other jurisdictions.
Anti-takeover provisions contained in our amended
and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover
attempt.
The Company’s amended and restated certificate
of incorporation and amended and restated bylaws contain provisions that could have the effect of delaying or preventing changes in control
or changes in our management without the consent of our board of directors.
These provisions include:
| · | providing that our directors may be removed only
for cause by the affirmative vote of the holders of at least 75% of the voting power of our then outstanding shares of common stock entitled
to vote generally for the election of directors; |
| · | providing that any action required or permitted
to be taken by the stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by
any consent in writing in lieu of a meeting of such stockholders, subject to the rights of the holders of any series of preferred stock
with respect to such series, if any; |
| · | providing that special meetings of our stockholders
may only be called by the board of directors pursuant to a resolution adopted by the affirmative vote of a majority of the board of directors; |
| · | providing that our board of directors can be
divided into three classes of directors, with each class as nearly equal in number as possible, serving staggered three year terms, other
than directors which may be elected by holders of preferred stock, if any. This system of electing and removing directors may tend to
discourage a third party from making a tender offer or otherwise attempting to obtain control of us, because it could have the effect
of increasing the length of time necessary to change the composition of a majority of the board of directors. In general, at least two
annual meetings of stockholders will be necessary for stockholders to effect a change in a majority of the members of the board of directors; |
| · | providing that all board vacancies, including
newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then
in office, even if less than a quorum, or by a sole remaining director and shall not be filled by the stockholders; |
| · | providing that our amended and restated bylaws
may only be amended by the affirmative vote of the holders of at least two-thirds of our then outstanding common stock; |
| · | providing the ability of our board of directors
to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences
and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; and |
| · | limiting the liability of, and providing indemnification
to, our directors and officers. |
These provisions, alone or together, could delay
hostile takeovers and changes in control of the Company or changes in our board of directors and management.
Any provision of our amended and restated certificate
of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could
limit the opportunity for our security holders to receive a premium for their securities and could also affect the price that some investors
are willing to pay for our securities.
We do not expect to pay any cash dividends
in the foreseeable future.
We expect to retain our future earnings, if any,
to fund the development and growth of our business. As a result, capital appreciation, if any, of our common stock will be the sole source
of gain, if any, for any stockholders for the foreseeable future.