Gene Biotherapeutics, Inc. - Annual Report: 2019 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2019

or

For the transition period from                  to

(Commission file number): 001-33635

GENE BIOTHERAPEUTICS INC.

(Exact name of registrant as specified in its charter)

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $0.0001 per share

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [  ] Yes [X] No

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [  ] Yes [X] No

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [  ] Yes [X] No

Indicate by checkmark whether the Registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant for Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). [  ] Yes [X] No

Indicate by check mark whether the Registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [  ]

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No

The aggregate market value of voting and non-voting stock held by non-affiliates of the Registrant as of June 30, 2019, the last business day of the Registrant’s most recently completed second fiscal quarter was approximately $1.1 million. Solely for purposes of this disclosure, shares of common stock held by executive officers, directors and by persons who own 10% or more of the outstanding common stock of the Registrant on such date have been excluded because such person may be deemed to be affiliates. This does not reflect a determination that such persons are affiliates for any other purpose.

As of March 31, 2021, 49,622,154 shares of the Registrant’s common stock were issued and outstanding.

TABLE OF CONTENTS

EXPLANATORY NOTE

We are filing this comprehensive Annual Report on Form 10-K for the fiscal year ended December 31, 2019 with expanded financial and other disclosures in lieu of filing a separate Annual Report on Form 10-K for the fiscal years ended December 31, 2018 and December 31, 2017, and separate Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, June 30, and September 30 during 2019, 2018 and 2017. Unless context requires otherwise, all references in this report to the “Company”, “Gene Biotherapeutics”, “Taxus Cardium”, “Cardium”, “we”, “our”, and “us” refer to Gene Biotherapeutics Inc. and as applicable, our consolidated subsidiaries: Angionetics, Inc. (“Angionetics”), Activation Therapeutics, Inc. (“Activation Therapeutics”) and LifeAgain Insurance Solutions, Inc. (“LifeAgain’). Due to financial hardship, we were unable to secure auditor review or audit of our financial statements and suspended regular reporting of our financial results of operations following our quarterly report for the period ended March 31, 2017. On May 22, 2020, after the period covered by this report, we secured a $1,700,000 financing arrangement and have used a portion of those proceeds to complete the financial statements and disclosures in this report.

The filing of this report will not result in us becoming “current” in our reporting requirements under the Securities Exchange Act of 1934. It is our intention to become current, and we are preparing quarterly reports for the periods ended March 31, June 30, and September 30, 2020. Once we do become current, we will continue to be precluded from the use of certain abbreviated registration statements and forms, which are predicated on timely filing all required reports over the prior 12-month period.

FORWARD-LOOKING STATEMENTS

This report, including the sections entitled “Business”, “Risk Factors”, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements that reflect our current expectations and views of future events. These forward-looking statements can also be identified by words such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “believes,” “anticipates,” “intends,” “estimates,” “approximates,” “predicts,” or “projects,” or similar terms. Forward-looking statements in this report may include statements about:

Caution should be taken not to place undue reliance on any such forward-looking statements. Forward-looking statements are subject to certain events, risks, and uncertainties that may be outside of our control that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. These factors include, among others, the risks described under Item 1A and elsewhere in this report, as well as in other reports and documents we file with the United States Securities and Exchange Commission (the “SEC”). The forward-looking statements in this report speak only as of the date of this report. We do not undertake to update or revise any forward-looking statements in the report, except as required by law.

PART I

We are a clinical stage biotechnology company focused on pre-clinical, clinical and commercialization of angiogenic gene therapy biotherapeutics for strategic niche markets primarily for the treatment of cardiovascular disease. Our technology platform is designed to biologically activate the human body’s innate angiogenic healing process to stimulate the growth of microvascular networks for patients with ischemic cardiovascular, cerebral, and other medical conditions and diseases, as well as for advanced tissue engineering applications.

Our lead product candidate Generx [Ad5FGF-4] is an angiogenic gene therapy product candidate designed for medical revascularization for the potential treatment of patients with myocardial ischemia and refractory angina due to advanced coronary artery disease. Generx has been cleared by the U.S. Food and Drug Administration (“FDA”) for a Phase 3 clinical study—the AFFIRM study. We have been working to secure the funding necessary to conduct that clinical trial and, if successful, commercialize Generx for marketing and sale in the U.S.

The Generx product candidate has been under clinical development for over a decade. Our management and consulting team have been responsible for the development of Generx from the initial scientific discoveries by researchers at the University of California, San Diego, through the first in-man U.S.-based clinical studies and late-stage clinical studies, the acquisition of the Generx development program by Schering AG following the successful completion of a five-year strategic partnership, and the re-acquisition of the Generx development program by Gene Biotherapeutics after Schering AG was acquired by Bayer Healthcare. Generx represents one of only a few cardiovascular DNA-based therapeutic product candidates to successfully advance into late-stage, U.S. Phase 3 clinical study.

History

We were incorporated in Delaware in 2003. In 2006, we changed our name to Cardium Therapeutics Inc. In 2013, we changed the Company’s name to Taxus Cardium Pharmaceuticals Group Inc. to reflect a broadened business plan to include small molecule drugs and medical devices. Based on the refocus of the Company on the clinical development of DNA-based angiogenic therapeutics in 2018, we changed the name of the Company to Gene Biotherapeutics.

During the period covered by this report, our operations have been conducted principally through operating subsidiaries including the following:

We entered 2017 in a cash constrained position. At that time, our principal operating goal was to secure the capital necessary to advance the clinical development and commercialization of Generx. In October 2017 we entered into an agreement with Landmark Pegasus, Inc. (“Landmark”), a business development and strategic partnering company, to assist us with the previously announced plans to sell our Excellagen product and assist with the strategic partnering for the development of Generx. In lieu of a cash engagement fee, we transferred our residual investment in LifeAgain along with our minority equity investment in Healthy Brands to Landmark, effectively exiting those businesses.

In July 2018, we sold our FDA-cleared Excellagen® product to Olaregen Therapeutix, Inc. (“Olaregen”) for aggregate consideration of up to $4,000,000. At closing, we received a cash payment of $650,000, the remaining to be paid as royalty payments of 10% of all worldwide sales of Excellagen totaling up to an additional $3,350,000. As of the date of this report, no royalties have been received. We retained rights to manufacture, market and sell Excellagen in Greater China, The Russian Federation, and the Commonwealth of Independent States (Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan).

In April 2020, after the period covered by this report, we transferred our residual rights in Excellagen to Shanxi Taxus Pharmaceuticals Co. Ltd. (“Shanxi”) in exchange for the release of any rights or claims in ownership interest in Gene Biotherapeutics. In connection with this transaction, Shanxi agreed to apply its previously funded $600,000 subscription payment as cash consideration in exchange for the Excellagen ownership rights. Shanxi also released any future rights or claims against us.

On April 10, 2020, after the period covered by this report, our Angionetics, Inc. subsidiary entered into a Distribution and License Agreement with Shanxi (as amended, the “Shanxi License Agreement”), granting Shanxi certain license rights with respect to our Generx product candidate. The distribution and license rights commence only after we obtain U.S. FDA approval for marketing and sale of Generx in the United States. The license rights include (a) a non-exclusive right to manufacture Generx products in China, and (b) an exclusive right to market and sell Generx products in Singapore, Macau, Hong Kong, Taiwan, any other municipality other than mainland China where Chinese (Mandarin or Cantonese) is the common language, the Russian Federation, and the Commonwealth of Independent States (the “CIS”). The Shanxi License Agreement provides for a progress royalty ranging from 5% up to 10% based on annual net sales up to and including $50 million at 5%; 6% for sales ranging greater than $50 million to $200 million; 8% for sales greater than $200 million to $450 million and at 10% for any sales greater than $450 million of the Generx product sold by Shanxi in the licensed territory.

In May 2020, after the period covered by this report, we entered into a Preferred Stock Purchase Agreement with Nostrum Pharmaceuticals, LLC (“Nostrum”), selling Nostrum 1,700,000 shares of our newly authorized Series B Convertible Preferred Stock in exchange for $1,700,000. Each share of Series B Convertible Preferred Stock is convertible into shares of Common Stock at a conversion ratio of 0.0113. Consequently the 1,700,000 shares are convertible into an aggregate of 150,442,478 shares of Common Stock. In addition, Nostrum entered into an agreement with Sabby Healthcare Master Fund Ltd. (“Sabby”), the sole holder of our outstanding Series A Convertible Preferred Stock, under which Nostrum purchased 220 shares of our Series A Convertible Preferred Stock from Sabby, which is convertible into 88,496 shares of common stock. Consequently, the 220 shares are convertible into an aggregate of 19,469,026 shares of Common Stock. Nostrum also agreed to purchase up to 570 additional Series A Convertible Preferred Stock from Sabby, within one year following the effective date of the transaction. Since May 2020, 397 shares of Series A Preferred Stock have been converted into 35,132,755 shares of our Common Stock (conversion rate of 88,496), that has increased our outstanding Common Stock to 49,622,154 shares as of March 31, 2021. As a result of these transactions, Nostrum currently controls approximately 75.2% of the voting interests of our Company.

Nostrum is a privately held pharmaceutical company engaged in the formulation and commercialization of specialty pharmaceutical products and controlled release, orally administered, branded and generic drug products. We will use the proceeds from the sale of the Series B Convertible Preferred Stock to fund working capital requirements in preparation for conducting the U.S. FDA-approved Phase 3 clinical trial for our Generx product candidate, and a portion of these proceeds will be used to complete the financial statements and disclosures in this report. We believe that Nostrum’s assets and experience in the formulation and commercialization of pharmaceutical products will facilitate the administration and completion of the Phase 3 clinical trial for Generx on a cost-effective basis.

In March 2021, after the period covered by this report, the Company entered into an agreement with FUJIFILM Diosynth Biotechnologies (“FDB”) to manufacture the Generx [Ad5FGF-4] angiogenic gene therapy product candidate for Phase 3 clinical evaluation for the treatment of refractory angina due to late-stage coronary artery disease. Manufacturing operations will be conducted at FDB’s facilities in College Station, Texas where FDB will perform technology transfer and process development activities for Phase 3 clinical and commercial-scale GMP manufacturing of Generx.

Accordingly, our current business is centered around the clinical development and commercialization of Generx for the potential treatment of patients with myocardial ischemia and refractory angina due to advanced, late-stage coronary artery disease. In the future, we expect to pursue other potential ischemia-related cardiovascular and cerebral therapeutic opportunities as well as advanced tissue engineering applications. We estimate that there are up to 1.2 million patients in the U.S. with refractory angina, representing up to $6.0 billion addressable market opportunity, and up to $20.0 billion worldwide.

The Generx Product Candidate

Our lead product candidate, Generx, is a first in class, single dose, angiogenic gene therapy product candidate that is designed to improve blood flow and to increase the supply of oxygenated blood in patients with refractory angina and myocardial ischemia due to advanced coronary artery disease. Generx has been designed to improve cardiac perfusion by promoting the formation of functional coronary collateral blood vessels within the heart through enlargement of existing arterioles (arteriogenesis) and formation on new capillary vessels (angiogenesis). This process, termed “medical revascularization,” represents a fundamentally new mechanism of action that involves the stimulation of the formation of new biological structures in the heart, as opposed to currently available pharmacologic therapies, which only address the symptoms of angina, or mechanical revascularization through surgical procedures involving stents or coronary artery bypass graft surgery.

Medical Revascularization for Refractory Angina

The Ad5FGF-4 product candidate requires three key elements: (1) a myocardial delivery vector, (2) a therapeutic transgene, and (3) a method of gene delivery. Generx is biologically engineered using an E1-region deleted, replication deficient adenovirus serotype 5 vector to deliver the 621 base pair gene encoding human fibroblast growth factor-4 (FGF-4) under the control of a modified cytomegalovirus (CMV) promoter. Adenovirus is one of the most well-characterized and widely used gene therapy vectors in preclinical and human clinical studies and has cGMP (defined below) manufacturing and testing standards established by the U.S. FDA. The Generx FGF-4 transgene has been engineered to include a signal peptide, which enables effective secretion from cells that express the protein (such as cardiac myocytes). Our preclinical studies have shown that therapeutic efficacy is significantly increased by the presence of such a signal sequence in the growth factor DNA construct [Gao et al., Human Gene Therapy 2005; 16:1058-64]. The CMV promoter can drive high levels of transgene protein expression in transfected cells for up to 3 weeks. This short-term expression is ideal for tissue regeneration clinical applications requiring generation of new biological structures, including promotion of new vessel growth in the heart.

The transfected heart cells then express and release FGF-4 protein, which we believe promotes the growth of new blood vessels and increased blood flow to ischemic heart tissue. The evidence shows that FGF-4 expressed by Ad5FGF-4 has the capacity to enlarge pre-existing collateral arterioles (arteriogenesis) and to form new capillary vessels (angiogenesis) when driven by cardiac hemodynamic-impairment and ischemic stimuli. In a pig model of myocardial ischemia, adenovirus mediated FGF gene therapy promoted increased regional myocardial blood flow, as measured by contrast echocardiography, that correlated with an increase in capillary number, determined by histologic assessment. Stimulation of angiogenesis by Ad5FGF-4 has also been demonstrated in an in vitro assay that recapitulates all phases of the in vivo angiogenesis process and provides a functional bioassay for Ad5FGF-4. This assay demonstrates a synergistic interaction between FGF-4 expressed by Ad5FGF-4, and endogenous vascular endothelial growth factor (VEGF) in the promotion of neo-vessel formation, with evidence that FGF-4 controls angiogenesis upstream of VEGF. FGF-4 appears to be a key angiogenic regulatory protein that stimulates the release and action of other angiogenic factors, including vascular endothelial growth factors (VEGF), platelet-derived growth factors (PDGF), and hepatocyte growth factor (HGF), to orchestrate and promote the growth of a functional collateral network in ischemic cardiac tissue.

Generx is administered to patients during a simple one-hour angiogram-like procedure by an interventional cardiologist using a standard cardiac balloon catheter, with no special training or new medical devices required. Generx is distributed into the microvascular pathways of the heart and transfects cardiac cells by binding to cell surface coxsackievirus-adenovirus receptors (CAR). A central finding from the Generx clinical development program is that cardiac ischemia drives Generx transfection into heart cells and possibly other cells, and that regional cardiac ischemia is an essential precursor to support the growth of collateral blood vessels for treatment response to Generx angiogenic gene therapy. Company-sponsored in vivo pre-clinical research conducted at Emory University demonstrated that intracoronary Ad5-based gene delivery under conditions of transient ischemia, and following pre-treatment with nitroglycerin, significantly enhances transgene expression in the heart by over two orders of magnitude (>800x), as compared to prior intracoronary delivery methods. We believe that the significant improvements in gene transfer are likely due to ischemia-driven up-regulation of the cardiac CAR receptors and improved transit through dilated gap junctions due to enhanced cell permeability that is believed to be activated using nitroglycerin.

Addressable Market

Generx is expected to initially target patients with refractory angina—chronic and disabling angina that: (1) are no longer responsive to small molecule anti-anginal drug therapy, (2) would not expect to benefit from mechanical revascularization procedures, including stents and coronary artery bypass graft surgery; or (3) continue to experience refectory angina following a mechanical revascularization procedure. We estimate that there are up to 1.2 million patients in the U.S. with refractory angina, representing up to $6.0 billion addressable market opportunity, and up to $20.0 billion worldwide.

Proposed Generx Treatment Algorithm for Patients with Refractory Angina

Consistent with Positioning in FDA-Cleared U.S. Phase 3 Clinical Trial

Given the widespread use of lipid-lowering drugs in the general population in the U.S., and increasingly worldwide, we now see more patients reporting angina with little or no evidence of obstructive coronary artery disease based on angiographic diagnostics. In the past 10 years, the number of ST-Elevation Myocardial Infarction patients has fallen by 50%, bypass surgery is down 40%, and the use of stents has been reduced by 30%. We believe that this trend away from mechanical revascularization will potentially increase the opportunity for Generx medical revascularization.

The most recently FDA approved anti-anginal drug with a novel mechanism of action is Ranexa® (ranolazine). It was FDA approved in 2006 as a treatment for chronic angina as a metabolic modulator designed to reduce the heart’s oxygen demand. Following FDA approval, Ranexa was acquired by Gilead Sciences for $1.4 billion in 2009. Ranexa is prescribed to be taken twice daily, generally as a 1000 mg oral tablet and Ranolazine is now available in generic form.

To support our go to market strategy, we conducted a survey of U.S. interventional cardiologists to gauge their experience-based assessment of the prevalence of refractory angina patients, and their openness to integrate the use of the Generx angiogenic gene therapy product candidate, upon FDA approval, into their clinical practice. The survey confirmed that all survey responders see patients with long-term refractory angina, and all were strongly positive and without reservation about adoption of Generx. All cardiologists surveyed felt there is a current need for Generx to treat refractory angina and they would consider using Generx in their daily practice if approved by the FDA. As shown in the following table, the Generx product candidate for medical revascularization therapy generated statistically significant improvements in cardiac perfusion (measured using SPECT as a reduction in reversible perfusion defect) as compared to placebo controls in both the U.S-based Phase 2 clinical study (AGENT-2), and a small confirmatory international study (ASPIRE), and the observed improvements were similar in magnitude to those reported following mechanical revascularization.

Generx AGENT-2 and ASPIRE SPECT Data

Generx Clinical Studies and FDA Developments

The Generx FDA regulatory dossier represents one of the most extensive and advanced DNA-based clinical data platforms ever compiled. Generx has been evaluated as a treatment for patients with refractory angina in four prior FDA-cleared, multi-center, randomized and placebo-controlled clinical studies (AGENT 1-4, Phase 1/2 to Phase 2b/3) and one small international study (ASPIRE). The four AGENT studies combined enrolled over 650 patients at over 100 medical centers in the U.S. and Western Europe and have generated over 2,500 patient years of safety data.

In these multiple prior clinical studies, the Generx product candidate appeared safe and well-tolerated, and has generated preliminary findings of efficacy in men and women, in measures of cardiac perfusion, cardiac performance, and angina status, including: (1) significant improvement in exercise duration by Exercise Treadmill Testing; (2) significant improvement in cardiac perfusion as assessed by SPECT imaging, with observed improvements comparable in magnitude to those seen with coronary artery bypass surgery and angioplasty with the use of stents; (3) significant and durable improvement in physical exertion capacity, as assessed by functional classification of angina out to 12 months post-treatment; (4) improvement in angina status, as assessed by documented reduction in angina episodes and nitroglycerin usage; and (5) significant reduction in incidence of worsening angina.

A central finding from the Generx AGENT clinical development program is that cardiac ischemia drives Generx transfection into heart cells, and that regional cardiac ischemia is an essential precursor to support the growth of collateral blood vessels for treatment response to Generx angiogenic gene therapy. Company-sponsored in vivo pre-clinical research conducted at Emory University demonstrated that intracoronary Ad5-based gene delivery under conditions of transient ischemia, and following pre-treatment with nitroglycerin, significantly enhances transgene expression in the heart by over two orders of magnitude (>800x), as compared to prior intracoronary delivery methods. We believe that the significant improvements in gene transfer are likely due to ischemia-driven up-regulation of the cardiac Coxsackievirus-Adenovirus Receptor (CAR) and improved transit through dilated gap junctions due to enhanced cell permeability that is believed to be activated using nitroglycerin.

Based on these pre-clinical findings, Generx was evaluated in a small international pilot study involving the use of a new balloon catheter-based delivery technique, and a higher Generx dose level, to induce transient ischemia during Generx delivery, and to potentially reduce variability and enhance efficacy responses by leveraging pre-conditioning cardiac physiology and our enhanced understanding of cell surface receptor-mediated uptake. Generx was administered under conditions of transient ischemia, achieved by balloon inflation, and following pre-treatment with nitroglycerin. This clinical study of 11 patients with refractory angina confirmed the preliminary efficacy (as evaluated by improvement in cardiac perfusion based on SPECT imaging) and safety (based on troponin measures to detect any heart muscle damage) of transient ischemia during Generx administration, together with the use of a higher single dose level of Generx. Based on positive findings from this study, the new catheter delivery techniques and higher dose level have been integrated into the U.S.-based Phase 3 AFFIRM clinical study protocol.

In September 2016, the FDA cleared the Generx AFFIRM Phase 3 clinical study protocol. The primary endpoint in the AFFIRM study is the change from baseline to month 6 in Exercise Tolerance Test (“ETT”) duration, with exercise duration limited by angina. FDA clearance of the AFFIRM protocol was based on over 2,500 patient years of accumulated safety data, a study design based on findings from a detailed meta-analysis of patient data from prior clinical studies that characterized male and female patient responders (including ETT data for approximately 600 patients and 3,000 treadmill tests), and demonstration in a small international study that balloon catheter-based delivery of Generx at an increased dose level, and under conditions of transient ischemia to improve gene transfection, is safe (based on measurement of serum troponin levels, an indicator of damage to heart muscle).

On February 3, 2017, the FDA granted the Phase 3 AFFIRM clinical study Fast Track designation. By granting Fast Track designation to the Generx Phase 3 clinical development program, FDA acknowledges that there remains unmet medical need for patients with refractory angina. The limited available therapies for patients with refractory angina primarily address the symptoms of refractory angina by reducing myocardial oxygen demand or transiently increasing blood flow to the ischemic myocardium and require prolonged use or numerous rounds of therapy. Furthermore, available therapies have modest and heterogenous response rates. Generx is unique in its angiogenic biological mechanism of action and disease-modifying potential.

In July 2020, we submitted a protocol amendment to FDA, refining some of the patient inclusion criteria and clarifying ETT stopping criteria for enrolled patients. In addition, an adaptive trial design was incorporated to allow for interim analysis and re-estimation of sample size required to achieve the primary efficacy endpoint of statistically significant improvement in ETT with Generx compared to Placebo at 6 months. Based on further statistical analysis of historical ETT data, the target sample size was reduced from 320 patients, without an interim analysis, to 160 patients with an interim analysis after 80 patients have been enrolled. The adaptive design allows for an increase in sample size up to 226 total patients if needed to reach statistical significance.

On a global basis, over 650 patients have been enrolled in four FDA-cleared clinical studies of Generx at over 100 medical centers in the U.S., Western Europe, and Asia, 455 of whom received a one-time intracoronary administration of Generx. Based on these studies, and other pre-clinical and further international clinical evaluations, our Generx product candidate appears to be safe and well-tolerated and has generated preliminary efficacy findings in men and women, based on multiple efficacy measures within patient subset groups. Long-term safety follow-up has generated over 2,500 patient years of safety data. With the successful completion of the planned AFFIRM Phase 3 clinical study, the Generx clinical research will have evaluated over 800 patients in clinical study protocols. Based on our FDA Fast-Track designation, and our established manufacturing processes, we believe that we would be in a position to initiate the submission to the FDA of a rolling Biologics License Application (“BLA”).

FDA Registration Pathway

For registration purposes, the FDA has classified our Generx product candidate to be an “anti-anginal” medication as a treatment for patients who have been diagnosed with stable exertional angina due to coronary artery disease and who are no longer responsive to current pharmaceutical therapy and mechanical interventional therapy. FDA approval of anti-anginal drugs and biologicals requires statistically significant efficacy improvements in exercise capacity as measured by ETT compared to a placebo control group. Developing a new and innovative anti-anginal is a challenging process and FDA approvals have been few and far between. In the past-50 years only one anti-anginal with a new mechanism of action has been approved and registered for marketing and sale in the U.S.

In 2006, following a 21-year clinical and commercial development process, the FDA approved Ranexa (ranolazine), a small molecule drug in tablet form that is taken twice daily with a new mechanism of action described as metabolic modulation, to reduce the heart’s oxygen demand. Based on the Ranexa package insert, the CARISA clinical study showed that Ranexa was safe and well tolerated by refractory angina patients and that patients treated with Ranexa showed an improvement in the primary efficacy endpoint ETT of +24 seconds (+28%) compared to the placebo control over the 12- week study period. Based on our retrospective subset analysis of data from the Generx AGENT-3 clinical study, and the FDA-cleared Ad5FGF-4 Phase 3 AFFIRM clinical study design, the Generx product candidate offers the potential to meet or exceed the ETT efficacy data reported in the Ranexa CARISA clinical study. As a result, we plan to submit a BLA following successful completion of the Phase 3 AFFIRM study.

Generx Competitive Advantage

We believe that the most significant factors in the field of new drugs and biologics are safety and efficacy as well as relative cost, and ease of administration as compared to other products, product candidates or approaches that may be useful for treating a particular disease condition. We believe that our Generx product candidate competes favorably against the current standard of care in each of these areas:

Additional Indications

Following our planned initial registration for refractory angina there are other potential ischemia-related cardiovascular and cerebral therapeutic opportunities that we may consider advancing forward with based on our angiogenic technology platform using varying dose levels and differing routes of administration.

Potential Pipeline of Generx (Ad5FGF-4) Medical Indications

Cardiac Syndrome X. A meta-analysis study [Vermeltfoort et al., Clinical Research in Cardiology. 2010; 99:475-81] reported that approximately 20% of patients who have a coronary angiography due to ongoing angina do not have obvious large vessel disease, a condition generally referred to as Cardiac Syndrome X (“CSX”). Patients with CSX are presumed to have coronary disease that is diffuse and/or affects smaller vessels within the heart. CSX is therefore sometimes referred to as “microvascular angina”. CSX cannot be addressed using traditional surgical approaches such CABG or PCI. We believe patients with CSX may potentially benefit from Generx microvascular angiogenic gene therapy, and plan to conduct a U.S.-based safety and efficacy study under the current FDA-approved IND. There are approximately 200,000 patients in the U.S. with CSX, 65% of whom are women.

Congestive Heart Failure. Congestive Heart Failure is a clinical syndrome that occurs when the heart is unable to pump sufficiently to maintain blood flow to meet the body’s needs. Common causes of heart failure include coronary artery disease, heart attack, high blood pressure, atrial fibrillation, valvular heart disease, excess alcohol use, infection, and cardiomyopathy of an unknown cause. In prior clinical studies of Generx in patients with myocardial ischemia and refractory angina, approximately 50% of enrolled patients were also diagnosed with mild congestive heart failure. The rationale supporting the application of angiogenic therapy for heart failure is based on the fact that mild and/or intermittent ischemia in the sub-endocardium (inner wall) can and often does occur in congestive heart failure with almost all primary causes. In a preclinical model of heart failure due to chronic sub-endocardial ischemia, a single administration of Generx resulted in significant improvement in cardiac function [McKirnan et al., Cardiac Vascular Regeneration. 2000; 1:11-21]. These preclinical findings support the potential use of Generx [Ad5FGF-4] angiogenic gene therapy as a non-surgical treatment option for heart failure. We are evaluating a Phase 2 clinical study of Generx angiogenic therapy for the treatment of patients with certain forms of congestive heart failure due to ischemic cardiomyopathy.

Moyamoya Disease & Cerebral Ischemia. Moyamoya disease (“MMD”) is a chronic occlusive, cerebrovascular disease that is characterized by progressive stenosis at the terminal portion of the internal carotid artery and an abnormal network of collateral vessels at the base of the brain. Pursuant to the Orphan Drug Act of 1983, MMD is an orphan indication, with <1 case per 100,000 in the U.S. The prevalence of MMD is much higher in East Asian countries than in Western countries. The highest prevalence of MMD is found in Japan at 3.16 per 100,000. Currently, there is no known medical treatment capable of reversing or stabilizing progression of MMD. Surgical revascularization such as extracranial-intracranial bypass is the preferred procedure for MMD patients with the main goal of preventing further ischemic injury by increasing collateral blood flow to hypo-perfused areas of the cortex. Collateral vessels are seen to sprout from bypassed vessels, thus providing increased blood flow to ischemic regions of the brain. We believe that Generx may potentially offer a new and simpler medical revascularization approach to the treatment of MMD, with a view toward further clinical development of angiogenic gene therapeutics for patients with a broader range of cerebral ischemic conditions, including vascular dementia. Preclinical studies have demonstrated that adenovectors can transfect cells in the brain, and we are investigating potential routes of administration to MMD patients that include, (1) adjunctive application of Ad5FGF-4 during burr hole surgery to augment collateralization, and (2) infusion into the carotid artery, to target ischemic regions and stimulate collateral vessel formation.

Angiogenic Research Initiative for COVID-19.

Early research has provided evidence of respiratory, neurological, and cardiac abnormalities in patients who have had severe COVID-19 immunological response requiring acute care (including protracted hospitalization and the need for mechanical ventilation). For patients who have survived and seek to return to normal life, several continuing residual adverse medical conditions appear to persist.

While the scientific literature remains uncertain, it has been suggested that mechanisms by which COVID-19 could lead to cardiovascular morbidity include direct myocardial injury as a result of inflammatory cascade or cytokine release, acute coronary syndrome from acute inflammation-triggered destabilization of atheroma, microvascular damage due to disseminated intravascular coagulation and thrombosis, direct entry of SARS-CoV-2 into myocardial cells via ACE2 receptors, and hypoxemia combined with metabolic demands of acute illness leading to myocardial injury akin to a myocardial infarction.

Based on these preliminary insights, Gene Biotherapeutics’ research is focused on the design of an observational clinical study to evaluate if COVID-19 may exacerbate microvascular damage and perfusion impairment in patients with pre-existing coronary artery disease and cardiac reversible perfusion defects (“RPD”) prior to COVID-19 infection. We are proposing to assess the damage using SPECT (Single-Photon Emission Computed Tomography) imaging to evaluate changes in RPD as a result of COVID-19 infection. Demonstration of worsening perfusion due to COVID-19 would be supportive of the potential to evaluate the therapeutic benefit of the Generx [Ad5FGF-4] product candidate angiogenic gene therapy in this patient population.

Commercialization Business Strategy

We are committed to applying our first-mover scientific and clinical development leadership position in the field of angiogenic gene therapy for the treatment of patients with a variety of cardiovascular conditions which are related by insufficient cardiac perfusion and other potential ischemia-related cerebral therapeutic opportunities as well as advanced tissue engineering applications. The core elements of our commercial strategy include:

Government Regulation

Gene therapy biologics are subject to extensive regulation in the United States under the federal Food, Drug, and Cosmetic Act. In addition, biologics are also regulated under the Public Health Service Act. Both statutes and their corresponding regulations govern, among other things, the testing, manufacturing, distribution, safety, efficacy, labeling, storage, record keeping, advertising and other promotional practices involving biologics or new drugs. FDA approval or other clearances must be obtained before clinical testing, and before manufacturing and marketing of biologics and drugs. Obtaining FDA approval has historically been a costly and time-consuming process. Different regulatory regimes are applicable in other major markets.

Any product candidate we develop will require regulatory approvals on a country-by-country basis before human trials and additional regulatory approvals before marketing. Currently, each human study protocol is reviewed by the FDA and, in some instances, the National Institutes of Health (“NIH”), on a case-by-case basis. For biologics, we must sponsor and file an Investigational New Drug (“IND”) application with the FDA and be responsible for initiating and overseeing human clinical trials to demonstrate the safety and efficacy and, for a biologic product, the potency, which are necessary to obtain FDA approval of any such products. For any new drug applications, we will be required to select qualified investigators (usually physicians within medical institutions) to supervise the administration of the products, and we will be required to ensure that the clinical trials are conducted and monitored in accordance with FDA regulations and the general investigational plan and protocols contained in the IND application. The FDA receives reports on the progress of each phase of testing, and it may require the modification, suspension, or termination of trials if an unwarranted risk is present to patients. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA. The IND application process can thus result in substantial delay and expense.

Our Generx product candidate is a gene therapy product, which is a relatively new category of therapeutics. The FDA and the NIH have published guidance documents with respect to the development and submission of gene therapy protocols. However, there is generally less information available for us to estimate the length of any trial period, the number of patients the FDA will require to be enrolled in the trials to establish the safety, efficacy, and potency of human gene therapy products, or that the data generated in these studies will be acceptable to the FDA to support marketing approval. Ethical, social, and legal concerns about gene therapy could result in additional regulations restricting or prohibiting the processes we or our suppliers may use. Federal and state agencies, congressional committees and foreign governments have expressed interest in further regulating biotechnology. More restrictive regulations or claims that our products are unsafe or pose a hazard could prevent us from commercializing any such products.

After the completion of trials of a new drug or biologic product, we will have to secure FDA marketing approval. The New Drug Application (“NDA”) or BLA must include results of product development, laboratory, animal and human studies, and manufacturing information. The testing and approval processes require substantial time and effort and there can be no assurance that the FDA will accept the NDA or BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all. In the past, NDAs and BLAs submitted to the FDA have taken, on average, one to two years to receive approval after submission of all test data. If questions arise during the FDA review process, the approval process can take more than two years.

Notwithstanding the submission of all relevant data, the FDA may ultimately decide that the NDA or BLA does not satisfy its regulatory criteria for approval and may require additional studies. In addition, the FDA may condition marketing approval on the conduct of specific post-marketing studies to further evaluate safety and effectiveness. Rigorous and extensive FDA regulation of pharmaceutical products continues after approval, particularly with respect to compliance with Current Good Manufacturing Practices (“cGMPs”), reporting of adverse effects, advertising, promotion, and marketing. Discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market, as well as possible civil or criminal sanctions.

In addition to FDA approval for the commercialization of our product candidates, our business is subject to state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act. These and other laws govern our use, handling and disposal of various biological, chemical, and radioactive substances used in, and wastes generated by, our operations.

To the extent that we conduct operations outside the United States, any such operations would be similarly regulated by various agencies and entities in the countries in which we operate. The regulations of these countries may conflict with those in the United States and may vary from country to country. In markets outside the United States, we may be required to obtain approvals, licenses, or certifications from a country’s ministry of health or comparable agency before we begin operations or the marketing of products in that country. Approvals or licenses may be conditioned or unavailable for certain products. These regulations may limit our ability to enter certain markets outside the United States.

Competition

The pharmaceutical industry is intensely competitive. Our product candidates will compete with existing drugs, therapies, biotherapies, stem cell therapies, medical devices, or procedures and with others under development. There are many pharmaceutical, biotechnology and medical device companies, public and private universities and research organizations actively engaged in research and development of products for the treatment of cardiovascular and related diseases.

Our Generx product candidate is a first in class, single-dose, disease altering therapeutic specifically targeted for the cardiac micro-vasculature, that is designed to stimulate and augment the formation of new biologic structures in the heart to increase the level of micro-vascularity and enhance cardiac perfusion, and improve cardiac performance, as measured by exercise tolerance and the occurrence and severity of myocardial ischemia-driven angina. Current pharmacologic therapies for patients with refractory angina are limited to anti-anginal medications to relieve angina chest pain, which are dosed daily or episodically and carry physiologic side effects, and surgical and percutaneous interventions, such as stents or by-pass surgery, to address large vessel coronary artery disease.

We are aware of products currently under development by competitors targeting the same or similar cardiovascular and vascular diseases as our Generx product candidate. These include small molecule drugs and biological treatments using forms of genes and stem cells.

Manufacturing Strategy

We will rely on contract manufacturing for the Generx product candidate. Based on the FDA clearance of the Generx Phase 3 clinical study protocol, all significant cGMP manufacturing factors have been resolved for our Generx product candidate in preparation for a commercial launch. The cGMP Generx manufacturing processes have been validated and are scalable.

We have been actively advancing our Generx product candidate’s engineering and process technology in preparation for commercialization. The adenovector Ad5FGF-4 is propagated in suspension cultures of fully characterized HEK 293 cells using serum-free/animal product-free growth medium, and aseptically purified using a combination of chromatography and filtration methods. The final product is vialed at a defined viral particle VP concentration and stored at -70°C. Clinical doses are expressed in total number of viral particles. We have established validated test methods and product specifications to ensure that each batch of Generx meets rigorous quality control standards. These quality control test methods include a cell-based vessel formation bioactivity assay that measures and confirms the pro-angiogenic potency of each newly manufactured batch of Generx.

Generx’s long-term product stability (at the current storage temperature of -70°C) makes it possible to manufacture Generx in large, cost effective batch sizes. Based on the current Generx validated cGMP manufacturing processes, we believe that the manufacture of Generx can be scaled to large batch quantities (up to approximately 2.0 million doses annually) without the need for significant additional capital investment or major process technology engineering. This flexibility will allow the manufacture of Generx at a highly economical direct cost, which could yield gross margins that would be approximately equivalent to a classic small molecule drug model. This would represent a significant commercial advantage in the market and could be orders of magnitude lower than the expected high cost associated with the manufacture of complex donor-based autologous cell therapies, that are currently under development by other biotechnology companies for cardiovascular applications.

In March 2021, the Company entered into an agreement with FUJIFILM Diosynth Biotechnologies (“FDB”) to manufacture the Generx [Ad5FGF-4] angiogenic gene therapy product candidate for Phase 3 clinical evaluation for the treatment of refractory angina due to late-stage coronary artery disease. Manufacturing operations will be conducted at FDB’s facilities in College Station, Texas where FDB will perform technology transfer and process development activities for Phase 3 clinical and commercial-scale GMP manufacturing of Generx.

Marketing and Sales

Our product candidates, such as Generx, must undergo clinical trials before any marketing and sales can begin. If we should obtain marketing approvals, we do not currently have the financial resources and internal capabilities to market and sell Generx. In conjunction with regulatory approval, we may develop a direct and highly focused internal marketing and sales force for the Generx product candidates, or establish strategic partnerships and alliances with pharmaceutical, biotechnology, medical device and cardiac diagnostic companies for the marketing and sale of Generx in the United States. Outside the U.S., we expect to rely on strategic partnerships and distributors for marketing and sales of Generx product candidates. However, our marketing and sales strategies may vary by product, medical indication and the size of the addressable market.

Commercialization Relationships

Huapont Life Sciences Co. Ltd (“Huapont”). Huapont is a China-based company focused on the research and development of new and innovative healthcare products, and the manufacture, marketing and sale of leading pharmaceutical products, active pharmaceutical ingredients, and a portfolio of safe and effective agricultural herbicides serving the agricultural business throughout the U.S. and South American markets. Huapont’s pharmaceutical business includes dermatology products, cardiovascular products, anti-tuberculosis agents, autoimmune-related products, and oncology-related products. Huapont’s API business involves the production and sale of bulk pharmaceutical chemicals, pharmaceutical intermediates, and preparations of Western medicines, with current annual revenues of approximately U.S. $1.5 billion, and approximately 12,000 employees operating throughout Mainland China. Huapont is listed on the Shenzhen Stock Exchange (002004.SZ) and carries a current market capitalization of approximately U.S. $1.7 billion.

In July 2016, Pineworld Capital Limited, an investment fund affiliated with Huapont acquired a 15% preferred stock equity interest in our Angionetics, Inc. subsidiary (the entity that holds the Generx product) in exchange for a $3.0 million investment. Concurrently with that investment, Angionetics entered into a Distribution and License Agreement, granting Huapont an exclusive license to clinically develop, manufacture, market and sell the Generx angiogenic gene therapy product candidate in mainland China. The distribution and license rights commence only after we obtain U.S. FDA approval for marketing and sale of Generx in the United States. Once the license is effective, Huapont has agreed, at its expense, to use commercially reasonable efforts to conduct clinical trials, make regulatory filings and take such other actions as may be necessary to commercialize Generx in mainland China. The Distribution and License Agreement calls for Huapont to make quarterly royalty payments at a rate of 10% of net sales of Generx products in mainland China, reducing to a 5% royalty based on the volume of annual sales. The royalty payments commence on the first commercial sale and expire on the earlier of the termination of any patent or regulatory exclusivity in China or fifteen years after the first commercial sale. The term of the agreement continues (unless terminated for breach) until Huapont has no remaining payment obligations to Angionetics. Upon expiration (but not an earlier termination) Huapont shall have a perpetual, non-exclusive, fully paid-up, and royalty-free license to Generx in mainland China.

Olaregen Therapeutix Inc. In July 2018, we sold our Excellagen product to Olaregen for aggregate consideration of up to $4,000,000. At closing, we received a cash payment of $650,000, and we will be entitled to receive royalty payments of 10% of worldwide net sales of Excellagen totaling up to $3,350,000.

Shanxi Taxus Pharmaceuticals Co., Ltd. on April 10, 2020, after the period covered by this report, our Angionetics, Inc. subsidiary entered into the Shanxi License Agreement, granting Shanxi certain license rights with respect to our Generx product candidate. The distribution and license rights commence only after we obtain U.S. FDA approval for marketing and sale of Generx in the United States. The license rights include (a) a non-exclusive right to manufacture Generx products in China, and (b) an exclusive right to market and sell Generx products in Singapore, Macau, Hong Kong, Taiwan, any other municipality other than mainland China where Chinese (Mandarin or Cantonese) is the common language, the Russian Federation, and the CIS (i.e., Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan). The Shanxi License Agreement provides for a royalty ranging from 5% up to 10% based on the level of annual net sales of the Generx product sold by Shanxi in the licensed territory.

On April 10, 2020, our Activation Therapeutics, Inc. subsidiary entered into a License and Patent Assignment Agreement with Shanxi (the “Shanxi Assignment Agreement”) pursuant to which we transferred of all of our residual rights and assets related to our Excellagen product to Shanxi. Under the terms of the Shanxi Assignment Agreement, we transferred all our license rights to manufacture, use, market and sell Excellagen to Shanxi in Greater China, the Russian Federation, and the CIS. We also assigned to Shanxi a Chinese patent that we received on Excellagen. In connection with the license, Shanxi agreed to apply previously funded $600,000 subscription payment to the license fee, and Shanxi released any future rights or claims against us. As a result, we have divested all its interest in Excellagen, other than the right to receive 10% royalty on worldwide net sales of Excellagen totaling up to $3,350,000, excluding China, Russia, and countries in the CIS.

Nostrum Pharmaceuticals, LLC. In May 2020, after the period covered by this report, we entered into a Preferred Stock Purchase Agreement with Nostrum selling 1,700,000 shares of our newly authorized Series B Convertible Preferred Stock in exchange for $1,700,000. The shares of Series B Convertible Preferred Stock are convertible into an aggregate of 150,442,478 shares of Common Stock. In addition, Nostrum entered into an agreement with the holder of our outstanding Series A Convertible Preferred Stock, under which Nostrum purchased 220 shares of our Series A Convertible Preferred Stock, convertible into an aggregate of 19,469,026 shares of Common Stock and agreed to purchase up to 570 additional Series A Convertible Preferred Stock. Since May 2020, such holder has converted 397 shares of Series A Convertible Preferred Stock into 35,132,755 shares of our Common stock, that has increased our outstanding Common Stock to 49,622,154 shares as of March 31, 2021. As a result of these transactions, Nostrum currently controls approximately 75.2% of the voting interests of our Company. Nostrum is a privately held pharmaceutical company engaged in the formulation and commercialization of specialty pharmaceutical products and controlled release, orally administered, branded and generic drug products. We believe that Nostrum’s assets and experience in the formulation and commercialization of pharmaceutical products will facilitate the administration and completion of the AFFIRM Phase 3 clinical trial on a cost-effective basis. However, we do not have any formal commercialization agreements in place with Nostrum currently.

Intellectual Property and Licensing-

We generally seek to protect our intellectual property through a combination of patents and trade secrets. We originally licensed certain assets and technology from Schering AG Group (now part of Bayer AG) relating to (a) methods of gene therapy for the treatment of cardiovascular disease (including methods for the delivery of genes to the heart or vasculature and the use of angiogenic and/or non-angiogenic genes for the potential treatment of diseases of the heart or vasculature); (b) therapeutic genes that include fibroblast growth factors (including FGF-4); insulin-like growth factors (including IGF-I); and potentially other related biologics; and (c) other technology and know-how, including manufacturing and formulation technology, as well as data relating to the clinical development of Generx and corresponding FDA regulatory matters. Under this agreement, we may be required to pay Schering AG a $10 million milestone payment upon the first commercial sale of each product. We also may be obligated to pay royalties equal to: (i) 5% on net sales following a first commercial sale of an FGF-4 based product such as Generx in the United States, Europe, or Japan, or (ii) 4% on net sales of other products developed based on technology transferred by Schering AG following a first commercial sale in the United States, Europe, or Japan, and (iii) a royalty of 2.5% (for FGF-4 based technology) or 2% (for other products) in territories where the product would not infringe the patent rights which were licensed by Schering AG.

In connection with the Schering portfolio, we acquired the rights to certain patents owned by the University of California related to the use of the catheter as part of the Generx treatment and New York University which held a patent on the FGF-4 gene. However, the underlying patents have subsequently expired. Accordingly, we do not own or have rights to any specific patent projection with respect to the Generx product candidate. Our principal intellectual property rights with respect to Generx are trade secrets that we have developed over the past decade.

In June 2016 we entered into a Distribution and License Agreement with an affiliate of Huapont whereby we granted the Huapont affiliate an exclusive license to clinically develop, manufacture, market and sell the Generx angiogenic gene therapy product candidate in mainland China. In April 2020 we entered into a similar agreement with Shanxi to manufacture Generx in mainland China and to sell Generx in Greater China, the Russian Federation, and the CIS. The licenses are effective only upon FDA approval of Generx in the U.S. For additional terms of the licenses, see “Business—Commercialization Relationships.”

In July 2018, we sold our Excellagen product to Olaregen for cash proceeds of $650,000, which has been recognized in the statement of operations as a gain on sale of assets and intellectual property. Under the terms of that arrangement, we transferred all assets and rights to the product retaining the rights to China, the Russian Federation, and the CIS. We are also entitled to royalty payments of 10% of all Olaregen’s worldwide sales of Excellagen, if any, up to an aggregate of $3,350,000. In April 2020, after the period covered by this report, we transferred our residual rights in Excellagen, covering China, the Russian Federation, and the CIS to Shanxi. We no longer have any ownership interest or rights in Excellagen, other than the royalty arrangement with Olaregen.

In the future, we or any future licensors may file and prosecute patent applications related to various technologies under license or development. There are several uncertainties affecting our ability to enforce any of our intellectual property rights as described under “RISK FACTORS - Risks Related to Our Intellectual Property”. There can be no assurance that any intellectual property assets, or other approaches to marketing exclusivity or priority, would be sufficient to protect our commercialization opportunities, nor that our planned commercialization activities will not infringe any intellectual property rights held or developed by third parties.

Employees

As of December 31, 2019, we had four full-time employees. Our employees are not represented by a collective bargaining agreement and we have not experienced any work stoppages as a result of labor disputes.

Available Information

Our website address is www.genebiotherapeutics.com. We make available, free of charge, through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file or furnish such reports to the SEC. The information on our website is not part of this or any other report we file with, or furnish to, the SEC.

You should carefully review and consider the risks described below, as well as the other information in this report and in other reports and documents we file with the SEC when evaluating our business and future prospects. 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 perceive as immaterial or remote, may also occur. If any of the following risks or any additional risks and uncertainties actually occur, our business could be materially harmed, and our financial condition, results of operations and future growth prospects could be materially and adversely affected. In that event, the market price of our Common Stock could decline, and you could lose all or a portion of the value of your investment in our stock. You should not draw any inference as to the magnitude of any particular risk from its position in the following discussion.

Risks Related to the Development of Product Candidates

The regulatory approval processes of the FDA are inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, we may never generate revenue or achieve profitability.

To generate revenues, we must successfully complete clinical trials of our product candidates and obtain marketing approval from the FDA. We may never succeed in securing FDA approval for Generx or any new product candidate, and, even if we do, we may never generate sufficient revenue to achieve profitability. Our product candidates could fail to receive regulatory approval for many reasons, including the following:

Generally, there is a high rate of failure for drug candidates proceeding through clinical trials. 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. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. It is not uncommon for companies in the biopharmaceutical industry to suffer significant setbacks in advanced clinical trials due to nonclinical findings made while clinical studies were underway and safety or efficacy observations made in clinical studies, including previously unreported adverse events.

We cannot be certain that any of our product candidates will be successful in clinical trials or receive regulatory approval. Further, our product candidates may not receive regulatory approval even if they are successful in clinical trials. If we do not receive regulatory approvals for our product candidates, we may not be able to continue our operations.

In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials, may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate or may restrict its distribution. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

Clinical trials are expensive, time-consuming, and difficult to design and implement, and involve an uncertain outcome.

Before obtaining marketing approval from the FDA or other comparable foreign regulatory authorities for the sale of our product candidates, we must complete pre-clinical development and extensive clinical trials to demonstrate the safety and efficacy of our product candidates. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. Although we are planning for certain clinical trials relating to Generx and our other product candidates, there can be no assurance that the FDA will accept our proposed trial designs.

We may experience delays in our clinical trials, and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including delays related to:

If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences would harm our business, financial condition, and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

If the third parties that we rely on for pre-clinical and clinical trial support do not successfully perform their contractual legal and regulatory duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates.

We have relied upon and plan to continue to rely upon third-party medical institutions, clinical investigators, contract laboratories and other third party CROs to monitor and manage data for our ongoing preclinical and clinical programs. We rely on these parties for execution of our preclinical and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with Good Clinical Practices (“GCPs”), which are regulations and guidelines enforced by the FDA, the Competent Authorities of the member states of the European Economic Area (EEA), and comparable foreign regulatory authorities for all our products in clinical development.

Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators, and trial sites. If we or any of our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, the European Medicines Agency (“EMA”) or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

In addition, our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our on-going clinical, non-clinical and preclinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data, they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed, or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines.

If we are unable to enroll patients in our clinical trials, our research and development efforts could be adversely affected.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until its conclusion. We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons. Patient enrollment is affected by many factors including:

Many pharmaceutical companies are conducting clinical trials in patients with the disease indications that our potential drug products target. As a result, we must compete with them for clinical sites, physicians and the limited number of patients who fulfill the stringent requirements for participation in clinical trials. Also, due to the confidential nature of clinical trials, we do not know how many of the eligible patients may be enrolled in competing studies and who are consequently not available to us for our clinical trials. Our clinical trials may be delayed or terminated due to the inability to enroll enough patients. The delay or inability to meet planned patient enrollment may result in increased costs and delay or termination of our trials, which could have a harmful effect on our ability to develop products.

We may be unable to maintain sufficient clinical trial liability insurance to fully insure against liabilities arising out of clinical trial activities.

We will require all patients enrolled in our clinical trials to sign consents, which explain various risks involved with participating in the trial. However, patient consents provide only a limited level of protection, and it may be alleged that the consent did not address or did not adequately address a risk that the patient suffered from. Additionally, we will generally be required to indemnify the clinical product manufacturers, clinical trial centers, medical professionals and other parties conducting related activities in connection with losses they may incur through their involvement in the clinical trials. We may not be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities.

Our inability to retain sufficient clinical trial liability insurance at an acceptable cost to protect against potential liability claims could prevent or inhibit our ability to conduct clinical trials for product candidates we develop. We may be unable to obtain appropriate levels of such insurance. Even if we do secure clinical trial liability insurance for our programs, we may not be able to achieve sufficient levels of such insurance. Any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is more than the limits of our insurance coverage. We expect we will supplement our clinical trial coverage with product liability coverage in connection with the commercial launch of Generx or other product candidates we develop in the future; however, we may be unable to obtain such increased coverage on acceptable terms or at all. If we are found liable in a clinical trial lawsuit or a product liability lawsuit in the future, we will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

We currently have only one significant product candidate—our Generx product candidate—and our business is substantially dependent on its success.

We do not currently have any viable product candidates other than Generx. Accordingly, our success is substantially dependent on our ability to successfully secure marketing approval and to commercialize Generx. If we fail to secure marketing approval for Generx, we could be forced to try to secure an alternative product candidate. Our internal research and development capabilities are limited and will initially be focused on the Phase 3 Generx clinical trial. We may evaluate, acquire, license, develop and/or market additional product candidates and technologies. We do not currently have substantial resources to procure additional technologies. The success of this strategy depends partly upon our ability to identify, select, and acquire promising pharmaceutical product candidates and products. The process of proposing, negotiating, and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Other companies, including some with substantially greater financial, marketing and sales resources, may compete with us for the license or acquisition of product candidates and approved products. We have limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into our current infrastructure. Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts. We may not be able to acquire the rights to additional product candidates on terms that we find acceptable, or at all. If we are unable to receive marketing approval and successfully commercialize Generx we may not be able to secure rights to another viable product candidate and may be forced to cease operations.

Interim “top-line” and preliminary data from our clinical trials may change as more patient data become available and are subject to verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose interim top-line or preliminary data from our clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations, and conclusions as part of our analyses of data, and we may not have received or had the opportunity to evaluate all data fully and carefully. As a result, the top-line, or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results once additional data have been received and fully evaluated. Top-line or preliminary data also remain subject to verification procedures that may result in the final data being materially different from the top-line or preliminary data we previously published. As a result, top-line and preliminary data should be viewed with caution until the final data are available.

Regulatory agencies may not accept or agree with our assumptions, estimates, calculations, conclusions, or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

If the interim, top-line or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects, or financial condition.

We have obtained Fast Track Designation for Generx, but that designation may not lead to a faster development, regulatory review, or approval.

If a product is intended for the treatment of a serious condition and nonclinical or clinical data demonstrate the potential to address unmet medical need for this condition, a product sponsor may apply for FDA Fast Track designation. We have obtained Fast Track designation for Generx for investigation into the treatment of refractory angina, providing opportunity for expedited clinical development and regulatory review. Fast Track Designation does not ensure that we will receive marketing approval or that approval will be granted within any particular timeframe. We may not experience a faster development or regulatory review or approval process with Fast Track designation compared to conventional FDA procedures. In addition, the FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program. Fast Track designation alone does not guarantee qualification for the FDA’s priority review procedures.

If the FDA does not conclude that our product candidates satisfy the requirements for the 505(b)(2) regulatory approval pathway, or if the requirements for approval of any of our product candidates under Section 505(b)(2) are not as we expect, the approval pathway for our product candidates will likely take significantly longer, cost significantly more, and encounter significantly greater complications and risks than anticipated, and in any case may not be successful.

We intend to seek FDA approval through the 505(b)(2) regulatory pathways for Generx. Section 505(b)(2) of the Food Drug and Cosmetics Act permits the filing of an NDA where at least some of the information required for approval comes from studies that were not conducted by or for the applicant. If the FDA does not allow us to pursue the 505(b)(2) regulatory pathways for our product candidates as anticipated, we may need to conduct additional clinical trials, provide additional data and information, and meet additional standards for regulatory approval. If this were to occur, the time and financial resources required to obtain FDA approval for our product candidates would likely substantially increase. Moreover, the inability to pursue the 505(b)(2) regulatory pathways could result in new competitive products reaching the market faster than our product candidates, which could materially adversely impact our competitive position and prospects. Even if we can pursue the 505(b)(2) regulatory pathways for a product candidate, we cannot assure you that we will receive the requisite or timely approvals for commercialization of such product candidate. In addition, we expect that our competitors will file citizens’ petitions with the FDA in an effort to persuade the FDA that our product candidates, or the clinical studies that support their approval, contain deficiencies. Such actions by our competitors could delay or even prevent the FDA from approving any NDA that we submit under Section 505(b)(2).

Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in other significant negative consequences.

Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. The clinical evaluation of Generx and our other product candidates in patients is still in the early stages and it is possible that there may be side effects associated with their use. Results of our trials could reveal a high and unacceptable severity and prevalence of side effects. In such an event, we, the FDA, the IRBs at the institutions in which our studies are conducted, or the Data Safety Monitoring Board could suspend or terminate our clinical trials, or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of our product candidates for any or all targeted indications.

While we are not presently aware of any side effects from the use of Generx, possible serious side effects of gene transfer include viral or gene product toxicity resulting in inflammation or other injury to the heart or other parts of the body. The development or worsening of cancer in a patient could potentially be a perceived or actual side effect of gene therapy technologies. Furthermore, there is a possibility of side effects or decreased effectiveness associated with an immune response toward any viral vector or gene used in gene therapy. The possibility of such response may increase if there is a need to deliver the viral vector more than once.

Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the clinical trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. We expect to have to train medical personnel using our product candidates to understand the side effect profiles for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient injury or death. Any of these occurrences may harm our business, financial condition, and prospects significantly.

If we elect or are forced to suspend or terminate any planned clinical trial of Generx or any other of our product candidates, the commercial prospects for that product will be harmed and our ability to generate product revenue from that product may be delayed or eliminated. Furthermore, any of these events could prevent us or our partners from achieving or maintaining market acceptance of the affected product and could substantially increase the costs of commercializing our product candidates and impair our ability to generate revenue from the commercialization of these products.

Risks Related to Product Commercialization

Even if we obtain regulatory approvals to commercialize Generx or other product candidates, our product candidates may not be accepted by physicians or the medical community in general.

Our ongoing business depends on the success of our technologies and product candidates. Gene-based therapy, like our Generx product candidate, is a relatively new and rapidly evolving medical approach. Biotechnology and pharmaceutical companies have successfully developed and commercialized only a limited number of biologic-based products and to date only a limited number of cellular and gene therapy products have been approved by the U.S. FDA. Our product candidates, and the technology underlying them, are new and unproven and there is no guarantee that health care providers or patients will be interested in our products even if they are approved for use.

We cannot be certain that Generx or any other product candidate we successfully develop will be accepted by physicians, hospitals, and other health care facilities. The degree of market acceptance of any drugs we develop depends on a number of factors, including:

If the market does not accept our products or product candidates, when and if we are able to commercialize them, then we may never become profitable. It is difficult to predict the future growth of our business, if any, and the size of the market for our product candidates because the market and technology are continually evolving. There can be no assurance that our technologies and product candidates will prove superior to technologies and products that may currently be available or may become available in the future or that our technologies or research and development activities will result in any commercially profitable products. If our products do not gain market acceptance, we may not be able to fund future operations either through operating or financing activities.

Even if we obtain marketing approval for Generx or another product candidate, we will still face extensive and ongoing regulatory requirements which could significantly impact our operations.

Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, packaging, distribution, adverse event reporting, storage, recordkeeping, export, import, advertising, and promotional activities for such product, among other things, will be subject to extensive and ongoing requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, establishment registration and drug listing requirements, continued compliance with cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping and GCP requirements for any clinical trials that we conduct post-approval.

Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product candidate may be marketed or to the conditions of approval, including a requirement to implement a REMS. If any of our product candidates receives marketing approval, the accompanying label may limit the approved indicated use of the product candidate, which could limit sales of the product candidate. The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a product. Violations of the Federal Food, Drug, and Cosmetic Act, or FDCA, relating to the promotion of prescription drugs may lead to FDA enforcement actions and investigations alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws.

Later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes or failure to comply with regulatory requirements, could result in:

Further, the FDA’s policies may change, and additional government regulations may be enacted that could impose extensive and ongoing regulatory requirements and obligations on any product candidate for which we obtain marketing approval. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects, and ability to achieve or sustain profitability.

Healthcare reform measures could hinder or prevent our product candidates’ commercial success.

New laws, regulations and judicial decisions, or new interpretations of existing laws, regulations, and decisions, that relate to healthcare availability, methods of delivery or payment for products and services, or sales, marketing, or pricing, may limit our potential revenue, and we may need to revise our research and development programs. The continuing efforts of the U.S. and foreign governments, insurance companies, managed care organizations and other payors of health care services to contain or reduce health care costs may adversely affect our ability to set prices for our products which we believe are fair, and our ability to generate revenues and achieve and maintain profitability. We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified.

Further federal and state proposals and health care reforms are likely which could limit the prices that can be charged for the product candidates that we develop and may further limit our commercial opportunities. Our proposed products may not be considered cost-effective, and coverage and reimbursement may not be available or sufficient to allow us to sell our proposed products on a profitable basis. Our results of operations could be materially adversely affected by proposed healthcare reforms, by the Medicare prescription drug coverage legislation, by the possible effect of such current or future legislation on amounts that private insurers will pay and by other health care reforms that may be enacted or adopted in the future.

We intend to rely on third parties to produce commercial supplies of any approved product candidate, and our commercialization of any future product could be stopped or delayed or made less profitable if third party manufacturers fail to obtain approval of the FDA or comparable regulatory authorities or fail to provide us with drug product in sufficient quantities or at acceptable prices.

The manufacture of biotechnology and pharmaceutical products is complex and requires significant expertise, capital investment, process controls and know-how. Common difficulties in biotechnology and pharmaceutical manufacturing may include:

We do not currently have nor do we plan to acquire the infrastructure or capability internally to produce an adequate supply of compounds to meet future requirements for clinical trials and commercialization of our products or to produce our products in accordance with cGMP prescribed by the FDA. Drug manufacturing facilities are subject to inspection before the FDA will issue an approval to market a new drug product, and all of the manufacturers that we intend to use must adhere to the cGMP regulations prescribed by the FDA.

We expect to rely on third-party manufacturers for clinical supplies of our product candidates that we may develop. These third-party manufacturers will be required to comply with cGMPs, and other applicable laws and regulations. We will have no control over the ability of these third parties to comply with these requirements, or to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or any other applicable regulatory authorities do not approve the facilities of these third parties for the manufacture of our other product candidates or any products that we may successfully develop, or if it withdraws any such approval, or if our suppliers or contract manufacturers decide they no longer want to supply or manufacture for us, we may need to find alternative manufacturing facilities, in which case we might not be able to identify manufacturers for clinical or commercial supply on acceptable terms, or at all. Any of these factors would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates and adversely affect our business.

Manufacturing biologic products is subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit supply of our products.

We and/or our third-party manufacturers may be adversely affected by developments outside of our control, and these developments may delay or prevent further manufacturing of our products. Adverse developments may include:

If we or our third-party manufacturers were to encounter any of the above difficulties, or otherwise fail to comply with contractual obligations, our ability to provide any product for commercial purposes would be jeopardized. This may increase the costs associated with completing our commercial production. We may also have to take inventory write-offs and incur other charges and expenses for products that fail to meet specifications or pass safety inspections. Inability to meet the demand for our product candidate could damage our reputation and the reputation of our product among physicians, healthcare payors, patients, or the medical community, which could adversely affect our ability to operate our business and our results of operations. If production difficulties cannot be solved with acceptable costs, expenses, and timeframes, we may be forced to abandon our commercialization plans, which could have a material adverse effect on our business, prospects, financial condition, and the value of our securities.

If we are unable to develop satisfactory sales and marketing capabilities, we may not succeed in commercializing Generx or any other product candidate.

We have limited experience in marketing and selling drug products. Typically, pharmaceutical companies would employ groups of sales representatives and associated sales and marketing staff numbering in the hundreds to thousands of individuals to call on many physicians and hospitals. If we seek to market and sell our drugs directly, we will need to hire additional personnel skilled in marketing and sales. The establishment of a direct sales force or a contract sales force or a combination direct and contract sales force to market our products will be expensive and time-consuming and could delay any product launch. Further, we can give no assurances that we may be able to maintain a direct and/or contract sales force for any period or that our sales efforts will be sufficient to grow our revenues or that our sales efforts will ever lead to profits.

We may seek to collaborate with a third party to market our products. If we seek to collaborate with a third party, we cannot be sure that a collaborative agreement can be reached on terms acceptable to us. We cannot be sure that we will be able to acquire, or establish third party relationships to provide, any or all these marketing and sales capabilities.

We operate in a highly competitive industry and the emergence of an alternative product or technology could significantly impact the market opportunity for our products.

Biopharmaceutical product development is highly competitive and subject to rapid and significant technological advancements. We face and will continue to face intense competition from a variety of businesses, including large, fully integrated, well-established pharmaceutical companies who already possess a large share of the market, specialty pharmaceutical and biopharmaceutical companies, academic institutions, government agencies and other private and public research institutions in the United States, the European Union, and other jurisdictions. These companies have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved drugs than we do. This may make it easier for them to respond more quickly than us to new or changing opportunities, technologies, or market needs.

For our Generx product candidate, we will have to demonstrate that it provides advantages over existing standards of care including stents, enhanced external counter-pulsation, and Ranexa® (ranolazine). In addition, a number of competitors are developing alternative treatments for refractory angina, including product candidates being developed by Neovasc, BioCardia, Caladrius, and others.

Our competitors may develop more effective or more affordable products or achieve earlier patent protection or product commercialization and market penetration than us. As these competitors develop their technologies, they may develop proprietary positions that prevent us from successfully commercializing our future products. If we are unable to adapt, products and technologies developed by our competitors may render our products and product candidates uneconomical or obsolete, and we may not be successful in marketing our products and product candidates against competitors. We may never be able to capture and maintain the market share necessary for growth and profitability and there is no guarantee we will be able to compete successfully against current or future competitors.

If we successfully commercialize Generx or another product candidate, we will face the risk of product liability claims, which could adversely affect our business and financial condition.

Our sales and marketing will expose us to product liability risks that are inherent in the testing, manufacturing, and marketing of biotechnology products. Product liability may result from harm to patients using our products, such as a complication that was either not communicated as a potential side effect or was more extreme than communicated. Failure to obtain or maintain sufficient product liability insurance or otherwise protect against product liability claims could prevent or delay the commercialization or marketing of our products or product candidates or expose us to substantial liabilities and diversions of resources, all of which can negatively impact our business. Regardless of the merit or eventual outcome, product liability claims may result in withdrawal of product candidates from clinical trials, costs of litigation, damage to our reputation, substantial monetary awards to plaintiffs and decreased demand for products.

Risks Related to Intellectual Property Rights

Our intellectual property may not be sufficient to protect our products from competition, which may negatively affect our business as well as limit our partnership or acquisition appeal.

The patents relating to the fundamental processes for our Generx product candidate have expired. We do not currently have any patent protection related to Generx. For Generx, and other product candidates we may develop, we rely on trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position.

We may be subject to competition despite the existence of intellectual property we license or own. We can give no assurances that our intellectual property claims will be sufficient to prevent third parties from designing around patents we own or license and developing and commercializing competitive products. The existence of competitive products that avoid our intellectual property could materially adversely affect our operating results and financial condition. Furthermore, limitations, or perceived limitations, in our intellectual property may limit the interest of third parties to partner, collaborate or otherwise transact with us, if third parties perceive a higher than acceptable risk to commercialization of our products or future products.

It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection. If we fail to adequately protect our product candidates, others could compete against us more directly.

Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of our current and future product candidates, the processes used to manufacture them and the methods for using them, as well as successfully defending these patents against third-party challenges.

The patent positions of biotechnology and pharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in pharmaceutical patents has emerged to date in the United States or in foreign jurisdictions outside of the United States. Changes in either the patent laws or interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be enforced in the patents that may be issued from the applications we currently or may in the future own or license from third parties. Further, if any patents we obtain or license are deemed invalid and unenforceable, our ability to commercialize or license our technology could be adversely affected.

The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:

We cannot be certain that any future patents will issue with claims that cover our product candidates. Our ability to stop third parties from making, using, selling, offering to sell, or importing our product candidates is dependent upon the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.

If we are not able to adequately prevent disclosure of trade secrets and other proprietary information, the value of our technology and products could be significantly diminished.

We also rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers, and other advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information.

Furthermore, any license agreements we enter in the future may require us to notify, and in some cases license back to the licensor, certain additional proprietary information, or intellectual property that we developed using the rights licensed to us under these agreements. Any such licenses back to the licensor could allow our licensors to use that proprietary information or intellectual property in a manner that could harm our business. In addition, others may independently discover our trade secrets and proprietary information. For example, the FDA, as part of its transparency initiative, is currently considering whether to make additional information publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change in the future, if at all. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

We may incur substantial costs because of litigation or other proceedings relating to patents and other intellectual property rights.

If we choose to commence a proceeding or litigation to prevent another party from infringing our patents, that party will have the right to ask the examiner or court to rule that our patents are invalid or should not be enforced against them. There is a risk that the examiner or court will decide that our patents are not valid and that we do not have the right to stop the other party from using the related inventions. There is also the risk that, even if the validity of our patents is upheld, the examiner or court will refuse to stop the other party on the ground that such other party’s activities do not infringe our rights to such patents. In addition, the U.S. Supreme Court has recently modified some tests used by the U.S. Patent and Trademark Office, or USPTO, in granting patents over the past 20 years, which may decrease the likelihood that we will be able to obtain patents and increase the likelihood of challenge to any patents we obtain or license.

Any proceedings or litigation to enforce our intellectual property rights or defend ourselves against claims of infringement of third-party intellectual property rights could be costly and divert the attention of managerial and scientific personnel, regardless of whether such litigation is ultimately resolved in our favor. We may not have sufficient resources to bring these actions to a successful conclusion. Some of our competitors who may assert infringement may be able to sustain the costs of complex patent litigation more effectively than we can because they are better capitalized and have more resources than us. Moreover, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.

If we are unable to successfully defend against claims that we have infringed the intellectual property rights of others, we may be prevented from using certain intellectual property and may be liable for damages, which in turn could materially adversely affect our business, financial condition, or results of operations. Alternatively, we could be compelled to seek licenses from one or more third parties who could be direct or indirect competitors and who might not make licenses available on terms that we find commercially reasonable or at all.

Risks Related to International Operations

We may be subject to extensive regulations outside the United States and may not obtain marketing approvals for products in Europe and other jurisdictions.

In addition to regulations in the United States, should we or our collaborators pursue marketing approvals for Generx and our other product candidates internationally, we and our collaborators will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales and distribution of our products. Whether or not we, or our collaborators, obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country.

We expect to pursue marketing approvals for Generx and our other product candidates in Europe and other jurisdictions outside the United States with collaborative partners. The time and process required to obtain regulatory approvals and reimbursement in Europe and other jurisdictions may be different from those in the United States, and regulatory approval in one jurisdiction does not ensure approvals in any other jurisdiction; however, negative regulatory decisions in any jurisdiction may have a negative impact on the regulatory process in other jurisdictions.

Following a national referendum and enactment of legislation by the government of the United Kingdom, the United Kingdom withdrew from the European Union, or Brexit, on January 31, 2020, and entered into a transition period during which it will continue its ongoing and complex negotiations with the European Union relating to the future trading relationship between the parties. Significant political and economic uncertainty remains about whether the terms of the relationship will differ materially from the terms before withdrawal, as well as about the possibility that a so-called “no deal” separation will occur if negotiations are not completed by the end of the transition period. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent us from commercializing our product candidates in the United Kingdom and/or the European Union and restrict our ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for our product candidates, which could significantly and materially harm our business.

We have entered into agreements with third parties to market our Generx product candidate in certain territories if approved by relevant regulatory authorities, but there can be no assurance that the efforts of such third parties will meet our expectations or result in any significant product sales.

We have entered into license agreements with Pineworld Capital Ltd, and Shanxi for the right to manufacture and sell Generx in greater China and the CIS. The licenses are effective upon FDA approval to market Generx in the United States. Our licenses to Pineworld Capital Ltd, and Shanxi are exclusive, and we do not have a right to separately manufacture, use or sell our Generx product candidate into those territories. Consequently, we are dependent on the resources, efforts, and success of our licensees to successfully develop a market for Generx in those territories. We do not control the operations of our licensees and have limited rights to terminate the licenses under the terms of our agreements. We cannot be certain that our licensees will successfully generate any significant product sales, or that the royalties that we ultimately receive from these arrangements will meet our expectations.

Collaborations with Third Parties outside the United States presents additional risks.

Conducting clinical trials in foreign countries, as we may do for our current and future product candidates, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to the clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.

To the extent we agree to work exclusively with one collaborator in each area, our opportunities to collaborate with other entities could be curtailed. Lengthy negotiations with potential new collaborators may lead to delays in the research, development, or commercialization of product candidates. The decision by our collaborators to pursue alternative technologies or the failure of our collaborators to develop or successfully commercialize any product candidate to which they have obtained rights from us could materially harm our business, financial condition, and results of operations.

To the extent that we enter markets outside the United States, our business will be subject to political, economic, legal, and social risks in those markets, which could adversely affect our business.

There are significant regulatory and legal barriers in markets outside the United States that we must overcome to the extent we enter or attempt to enter markets in countries other than the United States. We will be subject to the burden of complying with a wide variety of national and local laws, including multiple and possibly overlapping and conflicting laws. We also may experience difficulties adapting to new cultures, business customs and legal systems. Any sales and operations outside the United States would be subject to political, economic, and social uncertainties including, among others:

Any changes related to these and other factors could adversely affect any business operations that we conduct outside the United States.

Risks Related to Financial Position, Need for Additional Capital, and Worldwide Environment

We have incurred losses since inception and anticipate that we will continue to incur significant net losses for the foreseeable future and may never achieve or maintain profitability.

We have sustained operating losses since our inception and will likely continue to sustain losses as we seek to develop our products and product candidates. We expect these losses to be substantial because of the significant amounts we expect to spend on development activities and clinical trials for our product candidates. We expect our net losses from operations to continue for at least the next few years.

Whether we will generate additional revenues and become profitable will depend on our ability, alone or with potential collaborators, to efficiently and successfully complete the development of our product candidates, successfully complete pre-clinical and clinical tests, obtain necessary regulatory approvals, and manufacture and market our products. There can be no assurance that any such events will occur or that we will ever become profitable. Even if we do achieve profitability, we cannot predict the level of such profitability. If we sustain losses over an extended period of time, we may be unable to continue our business.

We will need substantial additional funding to develop our Generx product candidate, and if we are unable to raise capital when needed, we could be forced to delay, reduce, or eliminate our product development programs or commercialization efforts.

We expect that our current cash will support our administrative operations only into 2021. Our expenses will increase over the next several years as we continue to develop and conduct clinical trials with respect to our Generx or other product candidates, seek regulatory approvals, and initiate commercialization efforts. Accordingly, we will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources. We do not have any arrangements for future financing in place currently. If we are unable to obtain such funds when needed, we may have to delay, scale back or terminate our product development or our business.

To the extent we raise additional capital through the sale of equity securities, the ownership position of existing stockholders could be substantially diluted. Anti-dilution adjustments to our Series A Convertible Preferred Stock and Series B Convertible Preferred Stock could cause further dilution. If additional funds are raised through the issuance of preferred stock or debt securities, these securities are likely to have rights, preferences and privileges senior to our common stock and may involve significant fees, interest expense, restrictive covenants, and the granting of security interests in our assets.

Future sales of securities could result in additional dilution of the percentage ownership of our stockholders and could cause the share price for our Common Stock to fall.

We expect that significant additional capital will be needed in the future to continue our planned operations, including conducting clinical trials, hiring new personnel, commercializing our products, and continuing activities as an operating public company. We expect to raise additional capital through the sale of debt or equity securities, but we do not have any firm arrangements for capital in place currently. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, preferred stock or other convertible securities or other equity securities in one or more transactions at prices and in a manner, we determine from time to time. If we sell common stock, convertible securities, or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.

We do not know how much additional financing will be necessary to finance our continued operations, which creates additional risk that financing will not be available to us when needed, or that the terms may not be favorable or may result in additional dilution to our current stockholders.

Our estimate as to how long we expect our existing cash to be able to continue to fund our operations and the costs required to move our Generx product candidate to commercialization are based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned. Our future funding requirements, both short-term and long-term, will depend on many factors, including:

Because of the numerous risks and uncertainties associated with product development, we are unable to accurately predict the timing or amount of expenses or when, or if, we will obtain marketing approval to commercialize any of our product candidates. If we are required by the U.S. Food and Drug Administration, or FDA, or other regulatory authorities such as the EMA, to perform studies and trials in addition to those currently expected, or if there are any delays in the development, or in the completion of any planned or future preclinical studies or clinical trials of our current or future product candidates, our expenses could increase, and profitability could be further delayed.

As a result, we cannot predict with certainty the amount of capital that we will need to raise to finance our continued operations. If we encounter unexpected delays or expenses or setback in our product development efforts, we may be compelled to seek additional financing, which may not be available on terms that are favorable to our investors at that time.

Our recurring losses from operations raise substantial doubt regarding our ability to continue as a going concern.

Our consolidated financial statements for the years ending December 31, 2019, 2018 and 2017 were prepared under the assumption that we will continue as a going concern for the next twelve months from the issuance date of these financial statements. Due to our recurring losses from operations from our inception and our limited cash resources, we concluded that there is substantial doubt in our ability to continue as a going concern within one year after the financial statements are issued without additional capital becoming available. Our independent registered public accounting firm has issued an audit opinion that included an explanatory paragraph referring to our projected future losses along with recurring losses from operations and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce expenditures, and, ultimately, to generate revenue. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We are currently dependent on the services of a few key employees and need to increase the size of our organization.

As of December 31, 2019, we employed a total of four full-time employees. We will need to expand our managerial, operational, technical, scientific, financial, and other resources to manage our operations and clinical trials, continue our research and development activities, and commercialize our product candidate. Our management and scientific personnel, systems, and facilities currently in place may not be adequate to support our future growth, and the loss of one or more of our executive officers or key employees or an inability to attract and retain highly skilled employees could adversely affect our business. We will need to attract and retain enough talented employees to:

Competition for qualified personnel is intense among companies, academic institutions, and other organizations. The pool of qualified personnel with experience working with the pharma market is limited overall. In addition, many of the companies with which we compete for experienced personnel have greater resources than we have. If we are unable to attract and retain key personnel, it may negatively affect our ability to successfully develop, test, commercialize and market our products and product candidates. If we fail to secure sufficient qualitied and talented personnel our development efforts may be delayed, become more costly or more susceptible to failure.

We may have material weaknesses in our internal control over financial reporting which may result in misstatements in our financial statements or erode investor confidence.

We have had limited financial resources and have historically had material weaknesses in our internal control over financial reporting, as described elsewhere in this report. We have applied a portion of the funds secured from the Nostrum financing to enhance and strengthen our internal controls and financial reporting. If we fail to completely mitigate those material weaknesses or significant deficiencies in our internal controls continue or occur in the future, we may fail to meet our future reporting obligations on a timely basis, or our financial statements could contain errors or misstatements. If such errors were sufficiently material, we would be required to restate prior period financial results, which may subject us to class action litigation.

Any failure to address the ineffectiveness of our internal controls could also adversely affect the periodic management evaluations of the effectiveness of our internal controls over financial reporting and our disclosure controls and procedures that are required to be included in our annual report on Form 10-K. Continued reporting of internal control deficiencies could also cause investors to lose confidence in our reported financial information, which could adversely impact demand for stock and stock price.

We now plan to file our quarterly reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020 and become current with our Section 13(a) filing obligations under the Securities Exchange Act of 1934. If remedial measures become required or if material weaknesses or significant deficiencies in our internal controls continue or occur in the future, any of the following may occur:

Any failure to address the ineffectiveness of our disclosure controls and procedures could also adversely affect the periodic management evaluations of the effectiveness of our internal controls over financial reporting and our disclosure controls and procedures that are required to be included in our annual report on Form 10-K. Internal control deficiencies and ineffective disclosure controls and procedures could also cause investors to lose confidence in our reported financial information. The future measures we plan to take may not remediate the ineffectiveness of our disclosure controls and procedures, and material weaknesses and restatements of financial results may arise in the future due to a failure to implement and maintain adequate internal control over financial reporting and adequate disclosure controls and procedures. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls, and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.

We are not current with our reporting requirements under Section 13(a) of the Securities Exchange Act of 1934.

We suspended our public reporting beginning in 2017 due to financial hardship. Following the filing of our Annual Report on Form 10-K for the 2019, 2018 and 2017 fiscal years, which is covered by this filing, we plan to submit our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2020, June 30, 2020, and September 30, 2020, and become current with our reporting obligations, and thereafter resume a timely filing schedule with respect to our future SEC reports. We expect to continue to face many of the risks and challenges related to the matters that led to the delay in the filing of our Annual Report on Form 10-K for the years ending December 31, 2017 and 2018, and 2019, including the following:

If one or more of the foregoing risks or challenges persist, our business, operations and financial condition are likely to be materially and adversely affected.

Impact of Coronavirus Outbreak

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally and since then authorities throughout the world have implemented measures to contain or mitigate the spread of the virus, including physical distancing, travel bans and restrictions, closure of non-essential businesses, quarantines, work-from-home directives, and shelter-in-place orders. These measures have caused, and are continuing to cause, business slowdowns or shutdowns in affected areas, both regionally and worldwide, which have impacted our business and results of operations.

The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020 and 2021.

Risks Related to Our Capital Structure and Owning our Common Stock

Our outstanding shares of Preferred Stock and warrants to purchase Common Stock far exceed the number of shares of our Common Stock outstanding and their conversion or exercise will result in substantial dilution to holders of our Common Stock.

As of March 31, 2021, we had 49,622,154 shares of Common Stock issued and outstanding. In addition, we had 393 shares of Series A Convertible Preferred Stock and 1,700,000 shares of Series B Convertible Preferred Stock outstanding. The Series A Convertible Preferred Stock is currently convertible into an aggregate of 34,778,761 shares of our Common Stock, and each share of Series B Convertible Preferred Stock is convertible into aggregate of 150,442,478 shares of Common Stock. Both our Series A Convertible Preferred Stock and our Series B Convertible Preferred Stock have anti-dilution protection in the event that we issue shares of Common Stock or equivalents at a price less than the current $0.0113 conversion price. In addition, as of March 31, 2021, we had warrants outstanding to purchase 14,799,333 shares of our Common Stock at prices of $0.19 or $0.80 per share. The warrants expire at various times from 2024 to 2027. The conversion of outstanding Series A Convertible Preferred Stock and Series B Convertible Preferred Stock and the exercise of outstanding warrants would substantially reduce the percentage ownership of holders of our Common Stock. The addition of substantial additional shares of Common Stock in the market could result in excess supply and adversely affect prevailing market prices of our Common Stock.

We may consider affecting a reverse stock split or other share recapitalization transaction, which could impact the value of our Common Stock.

The total number of shares of our Common Stock, on a fully diluted basis, nearly exceeds our authorized capital. In addition, we would like to increase the per share price of our outstanding Common Stock to a range that would meet initial listing standards for a national exchange, should we otherwise qualify for a listing. We have not fixed the terms of any such share recapitalization. Often when companies affect a reverses stock split, their post-split trading price does not reflect the full multiple, resulting in an effective decrease in value.

Nostrum’s control of approximately 75.2% of our voting securities gives them control over any action requiring stockholder approval and may discourage some investors from investing.

Nostrum through its ownership of our Series A Convertible Preferred Stock and Series B Convertible Preferred Stock controls approximately 75.2% of the voting interests our company. Nostrum will control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all our assets. In addition, Nostrum will exercise significant control over the management and affairs of our company. This concentration of ownership might harm the market price of our Common Stock if:

Our Common Stock is not listed on a national exchange which may diminish the market interest, liquidity, and price for our Common Stock.

Our common stock currently is listed only on the OTC Pink Sheets. We hope to have our Common Stock re-established on the OTC QB once our SEC filing delinquencies are rectified. OTC QB is a reporting service and not a securities exchange. It is our intent to secure a listing on the Nasdaq Capital Market or another National Exchange, but we do not currently meet the listing criteria and we may never qualify for trading on a national exchange.

Many institutional investors are prohibited from investing in stock unless they are listed on a national exchange. Also index funds are generally restricted to exchange listed securities. Accordingly, stock listed on the over-the counter market is less likely to secure general market interest, including analyst and research coverage. Stocks that trade on the over-the-counter market may experience lower trading volumes, higher spreads between bid and ask pricing, increased volatility, and lower prices generally that those traded on a national exchange. The inability to list our Common Stock on a national exchange may negatively impact the volume of trading and market price for our common stock.

We are subject to SEC rules concerning the regulation of “penny stocks” which may reduce investor demand and market prices for our Common Stock.

Our Common Stock is currently a “penny stock” under applicable SEC rules. While we have that designation, broker-dealers trading in our common stock must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. This requirement may impair the ability of broker-dealers to sell our Common Stock and the ability of interested purchasers to acquire shares. In addition to additional SEC regulation, penny stocks are generally perceived as more susceptible to trading manipulation schemes such as (a) control of the market by one or a few broker dealers, (b) manipulation of pricing through wash sale transactions, (c) so-called “boiler room” practices involving high pressure sales tactics, (d) excessive and undisclosed bid-ask differentials and mark-ups by selling broker-dealers. Consequently, many institutional investors will not invest in stock that are classified as penny stocks. These circumstances may reduce the demand for our Common Stock and could result in reduced liquidity or lower market prices for our Common Stock.

To raise capital to fund the development of our Generx product candidate, we have sold shares in our Angionetics subsidiary.

In 2016 we sold a 15% interest in our Angionetics, Inc. subsidiary to Pineworld Capital Limited. Our management did this because it believed that it could raise capital at a better valuation, and with less dilution to existing stockholders, than if it were to sell shares of Gene Biotherapeutics. Angionetics holds the intellectual property rights for our Generx product candidate. Consequently, Gene Biotherapeutics is only entitled to 85% of the economic return from the commercialization of Generx or any sale of Angionetics. While it is not currently contemplated, if Angionetics were to issue additional equity securities to third party investors, it will dilute the interest of Gene Biotherapeutics, and consequently our stockholders in Angionetics and the Generx product candidate.

The price of our Common Stock may fluctuate substantially and an investment in our Common Stock could decline substantially in value.

The market price for our Common Stock may be subject to greater volatility than other stock as a result of:

Investment in our Common Stock is risky, and you should invest in our common stock only if you can withstand a significant loss and wide fluctuations in the market value of your investment. Moreover, substantial volatility in our trading price would increase the potential for us to be subject to shareholder lawsuits that, even if unsuccessful, could be costly to defend and a distraction management time and resources away from our core operations.

We have never paid cash dividends on our capital stock and do not intend to pay cash dividends on our shares of common stock in the foreseeable future.

We do not anticipate generating cash from operations for several years while we continue development and qualification of our product candidates. For the foreseeable future, we intend to retain any future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends. Any return to stockholders will therefore be limited to the increase, if any, of our share price.

We are a “smaller reporting company” and can avail ourselves of reduced disclosure requirements applicable to small reporting companies, which could make our common stock less attractive to investors.

We are a smaller reporting company, and we will remain a smaller reporting company until the fiscal year following the determination that our voting and non-voting common stock held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter, or our annual revenues are more than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is more than $700 million measured on the last business day of our second fiscal quarter. Smaller reporting companies can provide simplified executive compensation disclosure, are exempt from the auditor attestation requirements of Section 404, and have certain other reduced disclosure obligations, including, among other things, being required to provide only two years of audited financial statements and not being required to provide selected financial data, supplemental financial information, or risk factors. We have elected to take advantage of certain of the reduced reporting obligations, which may render our common stock less attractive to some investors.

Our charter and Delaware law have anti-takeover effects that could discourage, delay, or prevent a change in control, which may discourage third party offers to acquire our Company.

Our company could be difficult to acquire due to anti-takeover provisions in our charter and Delaware law. Our bylaws provide for advance shareholder notice for actions to be taken at meetings of stockholders. In addition, our certificate of incorporation includes a provision for “blank check” preferred stock, which could be used to implement a stockholder rights plan. These provisions may make it more difficult for stockholders to take corporate actions and may have the effect of delaying or preventing a change in control. These provisions also could deter or prevent transactions that stockholders deem to be in their interests.

In addition, we are subject to the anti- takeover provisions of Section 203 of the Delaware General Corporation Law. Subject to specified exceptions, this section provides that a corporation may not engage in any business combination with any interested stockholder during the three-year period following the time that such stockholder becomes an interested stockholder. This provision could have the effect of delaying or preventing a change of control of our company. The foregoing factors could reduce the price that investors or an acquirer might be willing to pay in the future for shares of our common stock.

None.

We do not own any real property. We lease facilities for our corporate headquarters at 11230 Sorrento Valley Road, Suite #220, San Diego, CA 92121. We believe that our current facilities are in good condition and suitable for our current needs.

During our business, we may become involved in proceedings such as disputes involving goods or services provided by various third parties, intellectual property infringement claims, and employment disputes. We are not currently a party to any legal proceedings that we believe would reasonably be expected to have a material effect on our financial position. In October 2014, we received a complaint filed by BioRASI LLC (“BioRASI”) in Broward County, Florida, seeking payments allegedly owed for services that BioRASI provided in connection with our clinical trial conducted in the Russian Federation. We filed counterclaims. On September 27, 2017, all parties to this action executed a mutual release settlement agreement with no monies awarded.

Not applicable.

PART II

Market Information

Our common stock currently trades on the OTC Pink market under the symbol “CRXM.” Any over-the-counter market quotations for our common stock on the OTC Pink market reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Holders

As of December 21, 2020, there were approximately 100 stockholders of record of our common stock. Based on information we receive from brokerage firms in connection with proxy solicitations, we believe that there are approximately 5,000 beneficial owners of our common stock.

Dividends

We have never declared or paid any cash dividends on our common stock and we do not intend to declare or pay a dividend in the foreseeable future. We expect to sustain losses over the next several years. To the extent we do have earnings, we intend to retain any earnings to help provide funds for the development of our product candidates, the implementation of our business strategy and for our future growth.

Recent Sales of Unregistered Securities

We did not issue any securities in unregistered transactions during the years ended December 31, 2019, 2018 and 2017.

Repurchases of Equity Securities

We did not repurchase any of our outstanding equity securities the years ended December 31, 2019, 2018 and 2017.

Equity Compensation Plan Information

We do not currently have an equity incentive plan. Our prior 2005 Equity Incentive Plan expired on October 20, 2015, ten years after its adoption. All options or other awards issued under the 2005 Equity Incentive plan prior to its expiration remain outstanding in accordance with their terms.

Prior to 2017 we granted warrants to purchase common stock to our directors, executive officers, and employees. There were no warrants issued to our directors, executive officers, and employees in each of 2019, 2018 and 2017. The issued warrants had exercise prices of $0.19 and $0.80 per share, were granted with ten-year terms, and remain outstanding. Certain of the warrants were issued with anti-dilution protection, now expired, which increased the number of common shares in which the warrants were exercisable but did not change the exercise price. As of December 31, 2019, after considering anti-dilution adjustments, there are warrants outstanding to purchase an aggregate of 12,111,333 shares of Common Stock which are held by current and former directors, executive officers, and employees

The following table summarizes equity compensation plans approved by stockholders and equity compensation plans that were not approved by stockholders as of December 31, 2019.

As a smaller reporting company, we are not required to provide the information required by this item.

The following discussion and analysis are intended to help you understand our financial condition and results of operations for the last three years ended December 31, 2019. You should read the following discussion and analysis together with our audited consolidated financial statements and the notes to the consolidated financial statements included under Item 8 in this report. Statements in the following discussion that are not historical in nature are forward looking statements, and inherently subject to risk. Our future financial condition and results of operations will vary from our historical financial condition and results of operations described below based on a variety of factors. You should carefully review the risks described under Item 1A and elsewhere in this report, which identify certain important factors that could cause our future financial condition and results of operations to vary from our historical operations and from our current expectations of future results.

Overview

We are a clinical stage biotechnology company focused on pre-clinical, clinical and commercialization of angiogenic gene therapy biotherapeutics for strategic niche markets, primarily for the treatment of cardiovascular disease. Our technology platform is designed to biologically activate the human body’s innate angiogenic healing process to stimulate the growth of microvascular networks for patients with ischemic cardiovascular, cerebral, and other medical conditions and diseases, as well as for advanced tissue engineering applications. Historically, we have developed and sold various medical devices, product candidates and products.

We operated throughout the period covered by this report, with severely limited financial resources. During 2015 and 2016, prior to the period covered in this report, we took significant actions to reduce our operating expenses, including headcount reductions, downsizing offices, and suspending some operations while we sought capital to continue our business operations. In 2016 we contributed our assets related to our Generx product candidate into our Angionetics, Inc. subsidiary. We then sold a 15% preferred equity ownership interest in Angionetics, Inc. to Huapont in exchange for $3.0 million. After the filing of our quarterly report for the period ended March 31, 2017, we suspended filing our periodic reports with the SEC because we lacked the financial resources to continue the financial statement review and audits. This report covers our results of operations for the years ended December 31, 2019, 2018 and 2017.

Our current business is focused exclusively on the development of Generx, a gene therapy product candidate targeted for men and women with advanced ischemic heart disease and refractory angina. We have received FDA clearance and FAST Track designation covering our conduct of the AFFIRM Phase 3 clinical trial. We do not currently have any other products or other product candidates under clinical study, and have not generated any revenues from operations for the years ended December 31, 2019, 2018 and 2017. Our operations currently comprise one segment for financial reporting purposes.

Significant Developments

During the period covered by this report we entered into the following significant transactions:

Subsequent Events

The following significant events took place after the period covered by this report:

Critical Accounting Policies and Estimates

Our consolidated financial statements included in this report have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of our financial statements in accordance with U.S. GAAP requires that we make estimates and assumptions that affect the amounts reported in our financial statements and their accompanying notes. Accounting estimates or assumptions are inherently subject to change, and certain estimates or assumptions are difficult to measure or value. Our estimates are based on historical experience, industry standards, and various other assumptions that we believe are reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.

We believe that the following accounting policies involve the most complex judgments concerning assumptions and estimates with the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. For further information on all of our significant accounting policies, see the notes to our consolidated financial statements included in this report.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenues, and expenses, and that affect our recognition and disclosure of contingent assets and liabilities.

While our estimates are based on assumptions that we consider reasonable at the time they were made, actual results may differ from our estimates, perhaps significantly. If results differ materially from our estimates, we will adjust our financial statements prospectively as we become aware of the necessity for an adjustment.

We believe it is important for you to understand our most critical accounting policies. These are our policies that require us to make our most significant judgments and, as a result, could have the greatest impact on our future financial results.

Preferred Stock

The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Shares that are subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. The Company classifies conditionally redeemable preferred shares, which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control, as temporary equity. At all other times, preferred shares are classified as stockholders’ equity.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income(loss) in the years in which those temporary differences are expected to be recovered or settled. Due to the Company’s history of losses, a full valuation allowance has been recognized against the deferred tax assets.

The Company has adopted the provisions of ASC 740-10, which clarifies the accounting for uncertain tax positions. ASC 740-10 requires that the Company recognize the impact of a tax position in its financial statements if the position is more likely than not to be sustained upon examination base on the technical merits of the position. For the year ended December 31, 2019, the Company had no material unrecognized tax benefits, and based on the information currently available, no significant changes in unrecognized tax benefits are expected in the next twelve months.

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. For the years ended December 31, 2019, 2018 and 2017, the Company has not recorded any interest or penalties related to income tax matters. The Company does not foresee any material changes in unrecognized tax benefits within the next twelve months.

When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.

Tax positions that meet the more likely than not recognition threshold is measured at the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes our tax positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

Warrants

Warrants issued to third parties in connection with consulting and other services do not trade in an active securities market, and as such, we estimate the fair value of these warrants using an option pricing model. Following the authoritative accounting guidance, warrants with variable exercise price features or with potential cash settlement outside of our control are accounted for as liabilities, with changes in the fair value included in operating expenses, otherwise warrants determined to be equity classified are fair valued at the date of issuance, with no change in the fair value recorded in subsequent periods. We estimated the fair value of the warrants using the Black Scholes option pricing model. The Black Scholes model requires that our management make certain estimates regarding the expected stock volatility, the risk–free interest rate, the warrant’s expected life, and the expected forfeiture rate, to derive an estimated fair market value.

Results of Operations

Fiscal 2019 Compared to Fiscal 2018

The following tables sets forth our results of operations for the years ended December 31, 2019 and 2018, and the relative dollar and percentage change between the two years.

Research and development decreased in 2019 compared to 2018 by $11,941 or 4.7% due to a decrease in employee benefits.

Selling, general and administrative expenses decreased in 2019 by $314,287 or 34.6% compared to 2018 mainly due to a reduction in employee salary costs of $152,852 resulting from a headcount reduction of two employees on a permanent basis and one employee on a temporary basis during 2019. In addition, the Company incurred consulting costs of approximately $80,000 in relation to raising capital funds for the Company in 2018 compared with $nil in 2019, and an overall reduction in legal and regulatory professional fees of $61,851, in addition to a decrease in office supplies as the Company focused time and resources on raising capital resources and putting on hold regulatory filing matters therefore reducing the selling, general and administrative expenses in 2019 when compared to 2018. In addition, the depreciation expense in 2019 was lower due to Company property and equipment becoming fully depreciated.

During the year ended December 31, 2018, the company recognized a gain on sale of Excellagen® product to Olaregen in the amount of $650,000 which also represented the cash proceeds on the sale of the technological asset. The sale of Excellagen® was consistent with management restructuring of the company’s operations in order to focus efforts on development and sale of Generx.

Other expenses for the year ended December 31, 2019 included a gain on debt forgiveness in the amount of $1,659,917. The debt forgiveness is the result of settlement agreements reached with certain vendors as part of the pre-financing restructuring efforts of the Company. Of these amounts, $172,449 becomes due and payable upon FDA approval of Generx, and when total cumulative net sales of Generx reach $100 million, an additional amount totaling $225,000 will be due and payable. Interest expense increased in 2019 compared to 2018 by $4,273 primarily as result of an increase in the notes payable in the third quarter ended 2019 of approximately $120,000 bearing interest at 6% per annum on advances received from Nostrum.

Fiscal 2018 Compared to Fiscal 2017

The following tables sets forth our results of operations for the years ended December 31, 2018 and 2017, and the relative dollar and percentage change between the two years.

Research and development decreased in 2018 compared to 2017 by $89,582 or 26 %. The decrease in spending is primarily due to the Company’s continued cash constrained position in 2018 resulting in management focusing Company resources on raising capital to provide the resources to advance the development and commercialization of Generx. The Company also discontinued further development of other product lines and focused actively on selling intellectual property developed not related to the Generx product line.

Selling, general and administrative expenses decreased by $873,473 or 49.0% in 2018 compared to 2017 as a result of a concentrated effort to contain costs, reduction in salary expense due to a reduction in headcount, reduced legal and other professional fees as a result of the Company’s decision to suspend SEC filings beginning in 2017.

During the year ended December 31, 2018, the Company recognized a gain on the sale of Excellagen® product to Olaregen in the amount of $650,000. This compares to a gain on the sale of assets in 2017 of $50,000 related to the transfer of the Company’s residual investment in LifeAgain along with a minority equity investment in Healthy Brands in exchange for strategic financing consulting services.

Other expense for the year ended December 31, 2018 and 2017 also included interest expense related to interest on notes payable with unrelated parties. The total interest expense in 2018 was $31,558 compared with $20,219 in 2017, as a result of the note payable in the principal amount of $208,500, being outstanding for the full year in 2018 compared to an increase in the note through the 2017 year.

Fiscal 2017 Compared to Fiscal 2016

The following tables sets forth our results of operations for the years ended December 31, 2017 and 2016, and the relative dollar and percentage change between the two years.

Research and development expense decreased in 2017 compared to 2016 by $296,596 0r 46.2% as a result of the Company reducing all discretionary expenses in 2017 in order to conserve cash and focus on raising capital to be used for the Company’s efforts to continue the development of their core technologies and due to a decrease in employee salary expenses as a result of a reduction in headcount.

Selling, general and administrative expenses decreased in 2017 compared to 2016 by $418,103 or 19% due to the Company reducing headcount and discretionary expenditures during 2017, including suspending SEC filings to reduce legal, accounting and filing costs.

The Company recognized a gain on sale of assets in the amount of $50,000 in the year ended December 31, 2017. In October 2017, the Company entered into an agreement with Landmark to assist with the Company’s efforts to sell the Excellagen product and assist with the strategic partnering for the development of Generx. In lieu of an initial cash engagement fee of $50,000, the Company assigned our residual investment in LifeAgain along with a minority equity investment in Healthy Brands to Landmark, effectively exiting the development and commercialization of the product lines. The Company determined the fair value of the non-monetary exchange to be $50,000, since this was the negotiated third-party initial cost negotiated between two independent third parties and the transfer of the assets settled the initial fee in full.

Other income/expense includes interest expense which decreased by $152,606 in 2017 compared with 2016. In 2016 $146,996 in interest charges on unpaid license fees were expensed that were not charged in 2017. The remaining interest charges in each of 2016 and 2017 related to interest on advances and notes payable.

Liquidity and Capital Resources

The following table summarizes our liquidity and working capital position on December 31, 2019, 2018 and 2017:

Following the period covered by this report:

The following table summarizes our cash flows from (used in) operating, investing, and financing activities for the years ended December 31, 2019, 2018 and 2017:

The Company has not generated cash from operating activities. We did not generate revenue in any of the years covered by this report, and generally record operating losses in each of the years.

In 2018, the Company sold Excellagen for cash proceeds of $650,000 resulting in cash being generated from investing activities. The Company can also earn royalties on future sales on Excellagen, under the terms of the sales agreement.

Net cash provided by financing activities in 2019 compared to cash used by financing activities in 2018 is primarily due to Nostrum providing $120,000 in cash in exchange for a note payable, due in 24 months, bearing interest at 6%, offset by an increase in the notes payable resulting from interest accruals and payments made on the loan from officer of approximately $99,000. On December 31, 2019, we did not have any significant requirements for capital expenditures.

After the period covered by this report, we secured the $1,700,000 in financing from Nostrum as described above.

We anticipate that negative cash flows from operations will continue for the foreseeable future. We do not have any unused credit facilities. Our cash position, even after the Series B Convertible Preferred Stock financing with Nostrum, will not be sufficient to sustain our operations for more than twelve months. We intend to secure additional working capital to support our continued operations through sales of additional equity and debt securities. As long as any shares of our Preferred Stock are outstanding, we have agreed that we will not, without the consent of the holders of two-thirds of the Series A Convertible Preferred Stock, incur indebtedness other than specified “Permitted Indebtedness”, or incur any liens other than specified “Permitted Liens”.

Our principal business objective is to advance or Generx product candidate through the AFFIRM Phase 3 clinical trial and to begin commercialization of Generx in the United States. We expect that support from Nostrum will decrease the overall costs of the trial, but we estimate that we will still need $12.0 to $15.0 million in additional capital to complete manufacturing of Generx clinical supplies for the conduct of the planned Phase 3 AFFIRM clinical study, and administrative and operating expenses that include the costs associated with Gene Biotherapeutics remaining a public company. We plan to secure that capital through the sale of additional equity or debt securities or through other transactions that could include strategic partnering and distribution agreements. There are no agreements or arrangement for any additional financing in place at this time.

Our history of recurring losses and uncertainties as to whether our operations will become profitable raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments related to the recoverability of assets or classifications of liabilities that might be necessary should we be unable to continue as a going concern.

Off-Balance Sheet Arrangements

As of December 31, 2019, we did not have any significant off-balance sheet debt, nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that have or are reasonably likely to have a material current or future effect on financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses material to investors.

Recent Accounting Pronouncements

See Note 2 to the Consolidated Financial Statements included elsewhere in this report for disclosure and discussion of new accounting standards.

Quarterly Results of Operations

As described in the Explanatory Note, we are presenting our quarterly results of operations for each of the periods ended September 30, June 30, and March 31 for 2019, 2018 and 2017, respectively, herein, in lieu of filing separate Quarterly Reports on Form 10-Q for such periods.

For the Three Months Ended March 31, 2019 compared to the Three Months Ended March 31, 2018

The following tables sets forth our results of operations for the three-month period ended March 31, 2019 and 2018, and the relative dollar and percentage change between the two periods.

Selling, general and administrative expenses decreased, for the three months ended March 31, in 2019 by $55,031 compared to 2018 mainly due to a reduction in employees’ salary cost of approximately $24,000 resulting from two employees shifting from full-time to part-time in 2019. In addition, the company incurred consulting cost of $25,000 in relation to raising capital funds for the company in 2018 compared with nil in 2019.

Other expense increased $2,202 during the three-month period ended March 31, 2019 compared with March 31, 2018 primarily as a result of increase in the interest rate and due to the compounded interest rate impact on the note payable in 2019.

For the Three Months and Six Months Ended June 30, 2019 compared to the Three Months and Six Months Ended June 30, 2018

The following tables sets forth our results of operations for the three-month period and six-month ended June 30, 2019 and 2018, and the relative dollar and percentage change between the two periods.