Notable Labs, Ltd. - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2023

or

For the transition period from _________________ to _________________

Commission File Number: 001-36581

Notable Labs, Ltd.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (415) 851-2410

Vascular Biogenics Ltd.

8 HaSatat St.

Modi’in, Israel 7178106

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 7, 2023, the registrant had 9,001,320 ordinary shares, par value NIS 0.35 par value per share, outstanding.

Table of Contents

EXPLANATORY NOTE

Following the completion of the fiscal quarter ended September 30, 2023 covered by this Quarterly Report on Form 10-Q, on October 16, 2023, Notable Labs, Ltd., formerly known as “Vascular Biogenics Ltd.” (the “Company”), completed its business combination with Notable Labs, Inc. and Vibrant Merger Sub, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”) in accordance with the terms of the Agreement and Plan of Merger, dated as of February 22, 2023 (the “Merger Agreement”), by and among the Company, Notable and Merger Sub. Pursuant to the Merger Agreement, Merger Sub merged with and into Notable, with Notable surviving as a wholly owned subsidiary of the Company (the “Merger”). Also on October 16, 2023, in connection with, and prior to completion of, the Merger, the Company effected a 1-for-35 reverse share split (the “Reverse Share Split”) of its ordinary shares, of a nominal value of NIS 0.35 each (“Ordinary Shares”). The Company also changed its name to “Notable Labs, Ltd.” (the “Name Change”). Following the completion of the Merger, the business of Notable Labs, Inc. became the business conducted by the Company, which is a clinical-stage platform therapeutics company developing predictive precision medicines for patients with cancer. Unless otherwise noted, all references to share amounts in this Quarterly Report on Form 10-Q reflect the Reverse Share Split. As used herein, the words the “Company,” “we,” “us,” and “our” refer to Notable Labs, Ltd. and its direct and indirect subsidiaries, as applicable (which, in the case of the financial statements contained herein, refer to the Company prior to the Merger). In addition, the word “VBL” refers to the Company prior to the completion of the Merger. The financial statements herein reflect the results of VBL prior to completion of the Merger. The Merger is being accounted for as a reverse merger, and commencing with the fiscal period in which the Merger closed the historical financial statements of the Company will be those of Notable Labs, Inc. Since the Merger was not yet closed during the quarter ended September 30, 2023, the financial statements contained herein are those of the Company (formerly known as Vascular Biogenics Ltd.).

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that relate to future events or our future financial performance, which express the current beliefs and expectations of our management. Such statements involve a number of known and unknown risks, uncertainties and other factors that could cause our actual future results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include all statements that are not historical facts and can be identified by words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “will,” “would,” “could,” and similar expressions or phrases. We have based these forward-looking statements largely on our management’s current expectations and future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Forward-looking statements include, but are not limited to, express or implied statements about:

All forward-looking statements involve risks, assumptions and uncertainties. You should not rely upon forward-looking statements as predictors of future events. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission, or SEC, on March 14, 2023, as updated in Part II, Section 1A of this Quarterly Report on Form 10-Q, including, among other things, the following:

These risks, assumptions and uncertainties are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results.

All of the forward-looking statements we have included in this Quarterly Report are based on information available to us on the date of this Quarterly Report. We undertake no obligation, and specifically decline any obligation, to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Quarterly Report might not occur.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

VASCULAR BIOGENICS LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

VASCULAR BIOGENICS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS

(UNAUDITED)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

VASCULAR BIOGENICS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ EQUITY

(UNAUDITED)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

VASCULAR BIOGENICS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ EQUITY

(UNAUDITED)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

VASCULAR BIOGENICS LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

VASCULAR BIOGENICS LTD.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – GENERAL

Vascular Biogenics Ltd. (“VBL” or the “Company”) is a biopharmaceutical company that has historically focused on developing targeted therapies for immune-inflammatory diseases and cancer. VBL’s goal has been to provide differentiated targeted therapeutics to address the underlying cause of diseases where treatment options are limited.

VBL’s sole product candidate, VB-601, was a targeted antibody for immune-inflammatory applications that has shown disease-modifying activity across multiple preclinical models including multiple sclerosis, rheumatoid arthritis, non-alcoholic steatohepatitis (“NASH”) and inflammatory bowel disease. VB-601 was developed using VBL’s monocyte targeting technology (“MTT”) and is designed to specifically inhibit monocyte migration. VBL planned to monetize this asset prior to or concurrent with the Merger rather than pursue further clinical development internally. On June 30, 2023, VBL entered into a non-binding term sheet, as amended, for the proposed sale of VB-601 and MOSPD2 related assets (the “VB-601 Asset”) . On October 16, 2023, VBL completed the sale of the VB-601 Asset. See below for additional information.

In May 2023, VBL received an additional €1.4 million ($1.5 million) in grant funding from the EIC under the previously awarded ofra-vec grant.

Merger with Notable Labs, Inc.

On February 22, 2023, VBL entered into a Merger Agreement (the “Merger Agreement”) with Notable Labs, Inc., a Delaware corporation (“Notable”), and Vibrant Merger Sub, Inc., a Delaware corporation and VBL’s direct, wholly-owned subsidiary, pursuant to which, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Notable merged with and into Merger Sub at the effective time (“Effective Time”), with Notable continuing after the merger as the surviving corporation and VBL’s wholly-owned subsidiary (such transaction, the “Merger”).

On October 16, 2023, VBL closed the Merger with Notable. In conjunction with the Merger, the Company changed its name from “Vascular Biogenics Ltd.” to “Notable Labs, Ltd.” (the “Name Change”).

At the Effective Time, each outstanding share of Notable capital stock was converted into the right to receive VBL ordinary shares, under the exchange ratio formula in the Merger Agreement, with former Notable securityholders owning approximately 75.2% of Notable Labs, Ltd.’s ordinary shares outstanding on a fully diluted basis, and the securityholders of VBL owning approximately 24.8% of Notable Labs, Ltd.’s ordinary shares outstanding on a fully diluted basis.

Also on October 16, 2023, in connection with, and prior to completion of, the Merger, the Company effected a 1-for-35 reverse share split (the “Reverse Share Split”) of its ordinary shares, of a nominal value of NIS 0.35 each (“Ordinary Shares”).

Following the completion of the Merger, the business of Notable became the business conducted by the Company, which is a clinical-stage platform therapeutics company developing predictive precision medicines for patients with cancer.

Upon closing of the Merger, the board of directors of the Company consists of seven directors, with one director designated by VBL. Following the closing of the Merger, the Company is being led by Notable’s chief executive officer and executive management team.

At the annual and special meeting of the Company’s shareholders held on October 12, 2023, the Company’s shareholders approved amendments to the Company’s Amended and Restated Articles of Association (the “Articles”), to effect the Reverse Share Split, to increase the Company’s registered share capital by NIS 10,000,000 and authorize an additional 1,000,000,000 Ordinary Shares, subject to any adjustments required pursuant to the Merger and the Reverse Share Split, as determined by the Company’s board of directors (the “Share Capital Increase”), approve change of the Company’s name to “Notable Labs, Ltd.”, effective as of the closing of the Merger, and a modification to the legal quorum required for the Company’s general meeting of shareholders, which shall consist of at least one (1) shareholder who holds or represents at least 33 1/3% of the voting rights in the Company (the “Quorum Modification”), effective as of the closing of the Merger. Following the effect of the Reverse Share Split, the Company has 34,285,714 authorized Ordinary Shares and NIS 12,000,000 of registered share capital.

Asset Sale- Modi’in Facility

On February 15, 2023, VBL entered into a purchase agreement providing for the sale of VBL’s rights to the Modi’in manufacturing facility, along with certain tangible assets and equipment located therein for $7.1 million. In addition, VBL accrued a liability for a potential payment to the Israeli Innovation Authority (“IIA”) as a result of the sale, which was recorded against the capital gain. VBL completed the asset sale on March 9, 2023.

Sale of VB-601 Asset

On June 30, 2023, VBL entered into a non-binding term sheet with Wellbeing Group Ltd. (“Wellbeing”) (as amended on July 25, 2023, the “VB-601 Offer”) for the proposed sale of the VB-601 Asset to Wellbeing, or one of its assignees, for total consideration of up to $5 million plus royalties (the “VB-601 Asset Sale”). Wellbeing intended to form a new company and recruit Prof. Harats, Dr. Feige, and Mr. Backenroth (“Interested Parties”) as investors and partners to manage the company and develop VB-601 due to their historical knowledge of the program. Due to the involvement of the Interested Parties in the entity that is moving forward with and developing the VB-601 Asset, the transaction is considered a related party transaction, and required audit committee and board of directors approval and execution of definitive documentation. VBL’s board of directors also resolved that the closing of the VB-601 Asset Sale would be subject to the separate approval of the VBL shareholders at the VBL special meeting. The Interested Parties recused themselves from negotiations between VBL and Wellbeing regarding the VB-601 Offer.

On October 1, 2023, following the execution of the term sheet with Wellbeing on June 30, 2023 (as amended on July 25, 2023) (the “Term Sheet”), the parties entered into definitive asset purchase agreement (the “Asset Purchase Agreement”) for the sale of the VB-601 Asset. On October 16, 2023, the Company completed the sale to Immunewalk Therapeutics Inc. (“Immunewalk”), an assignee of Wellbeing, pursuant to the Asset Purchase Agreement. Under the Asset Purchase Agreement, Immunewalk agreed to pay an upfront cash payment of $250,000 to the Company at the closing and additional payments of up to $4.75 million upon the achievement of clinical and commercial milestones by Immunewalk, its Affiliates or Licensees. Immunewalk also agreed to pay a low to mid-single digit percentage tiered royalty on aggregate annual Net Sales by Immunewalk or any of its Affiliates above $50 million, for the sale of Covered Products. The Asset Purchase Agreement also clarified that in cases where Immunewalk licenses any of the VB-601 Assets, the Company is entitled to receive a low-teen digit percentage of the License Fees actually received by Immunewalk from a Licensee with respect to Net Sales of such Licensee and adjusted the definition of Net Sales in the Asset Purchase Agreement. In addition, the parties further agreed that in the event of an asset sale by Immunewalk, the royalty rates shall be adjusted as set forth in the Asset Purchase Agreement.

Nasdaq Listing

In August 2022, VBL received a deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market LLC (“Nasdaq”), notifying VBL that the Company’s listed securities did not maintain the minimum bid price requirement of $1.00 per ordinary share for continued listing on the Nasdaq Global Market for a period of 30 consecutive business days as required under Nasdaq Listing Rule 5450(a)(1). The Nasdaq deficiency letter did not result in the immediate delisting of VBL’s ordinary shares, and the Company’s ordinary shares continued to trade uninterrupted under the symbol “VBLT.” Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), VBL had a compliance period of 180 calendar days, or until February 27, 2023, to regain compliance with Nasdaq’s minimum bid price requirement. The Company did not regain compliance by February 27, 2023, requested the transfer of its listing to the Nasdaq Capital Market and received an additional 180 day period to regain compliance, or until August 28, 2023. The Company timely requested a hearing with the Nasdaq Hearings Panel, or the Panel, at which hearing it requested a further extension with which to evidence compliance with all applicable requirements for continued listing on Nasdaq. The Company’s plan to regain compliance included the completion of the proposed Merger and reverse stock split. On October 19, 2023, the Company received a written notification from Nasdaq stating that the Company has demonstrated compliance with Nasdaq’s initial listing requirements, including the bid price requirement with respect to the Company’s ordinary shares, and that, accordingly, Nasdaq considers the prior outstanding minimum bid price deficiency matter described above to be closed.

As part of the preparations for the Merger, VBL sold certain long-term assets and rights. Long-term assets which were not sold were written off. As a result, in the nine-month period ended September 30, 2023, the Company recorded a capital gain, net of impairment of $0.2 million.

Since incorporation through September 30, 2023, Notable Labs, Ltd. and its subsidiaries (hereinafter referred to as “the Post-Merger Company”) incurred losses and negative cash flows from operations mainly attributable to its development efforts and has an accumulated deficit. The Post-Merger Company has financed its operations primarily through the issuance of Preferred Shares and SAFE shares and through the cash inflow as a result of the Merger completed on October 16, 2023. As of the issuance date of these consolidated financial statements, Notable Labs, Ltd.’s cash and investments provide sufficient resources to fund its operations through at least the next 12 months. In order to develop and commercialize any future product candidates if they are granted regulatory approval, Notable Labs, Ltd. is required to obtain further funding through public or private offerings, debt financings, collaboration, licensing arrangements or other sources. Adequate additional funding may not be available to Notable Labs, Ltd. on acceptable terms, or at all. If Notable Labs, Ltd. is unable to raise capital when needed or on attractive terms, it may be forced to delay, reduce or eliminate its research and development programs or commercialization and manufacturing efforts.

NOTE 2 – BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements of VBL have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments (of a normal recurring nature) considered necessary for the fair statement of the results for the interim periods presented have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiary, VBL Inc. (U.S.-based subsidiary).

These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements in the Annual Report on Form 10-K for the year ended December 31, 2022, filed by VBL with the U.S. Securities and Exchange Commission (the “SEC”) on March 14, 2023. The comparative balance sheet at December 31, 2022 has been derived from the audited financial statements at that date.

On October 16, 2023, the Company closed the Merger with Notable.

As described in Note 1, in conjunction with the Merger, the Company changed its name from “Vascular Biogenics Ltd.” to “Notable Labs, Ltd.”.

In addition, in conjunction with the Merger, and as described in Note 1, the Company effected a 1-for-35 reverse share splitof its Ordinary Shares.

The Company accounted for the Reverse Share Split on a retroactive basis pursuant to ASC 260. As a result, all ordinary share amounts, options outstanding and exercisable for ordinary shares, amounts of pre-funded warrants and RSUs, exercise prices and loss per share amounts have been adjusted, on a retroactive basis, for all periods presented in these condensed consolidated financial statements and the applicable disclosures, to reflect such Reverse Share Split.

The Merger is being accounted for as a reverse merger, and commencing with the fiscal period in which the Merger closed the historical financial statements of the Company will be those of Notable Labs, Inc. Since the Merger was not yet closed during the quarter ended September 30, 2023, the financial statements contained herein are those of VBL.

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

The accounting policies and calculation methods applied in the preparation of the condensed consolidated interim financial statements are consistent with those applied in the preparation of the annual financial statements as of December 31, 2022 and for the year then ended.

Net Loss Per Share

VBL complies with accounting and disclosure requirements of FASB Accounting Standards Codification (“ASC”) Topic 260, “Earnings Per Share.” Basic loss per ordinary share is computed by dividing the net loss by the weighted average number of ordinary shares outstanding (including fully vested pre-funded warrants and fully vested restricted stock units (“RSUs”)) during the period.

Potentially dilutive securities have been excluded from VBL’s computation of net loss per share as such securities would have been anti-dilutive. There were 152,413(*) ordinary shares underlying outstanding options and RSUs at September 30, 2023, and 298,634(*) ordinary shares underlying outstanding options and RSUs at September 30, 2022.

NOTE 4 – SHAREHOLDERS’ EQUITY (*)

a. Ordinary Shares

The Company has 5,714,286 ordinary shares, NIS 0.35 par value per share, authorized as of September 30, 2023. Each ordinary share is entitled to one voting right. Ordinary share owners are entitled to dividends when funds are legally available and declared by the Company’s board of directors.

b. Pre-funded Warrants

In April 2021, the Company issued 230,000 pre-funded warrants in lieu of ordinary shares in an underwritten public offering at a price per share of $66.15. The pre-funded warrants are exercisable for $0.35 per share and have no expiration date. On July 28, 2023, 211,428 pre-funded warrants were exercised via cashless exercise resulting in the issuance of 204,010 ordinary shares.

c. Restricted Stock Units

During the nine months ended September 30, 2023, 21,429 restricted stock units vested and were exercised into ordinary shares at an exercise price of 0.35 NIS.

NOTE 5 – CONTINGENT LIABILITIES

The Company is committed to pay royalties to the Government of Israel (the “Government”) on proceeds from sales of products in the research and development of which the Government participates by way of grants. At the time the grants were received, successful development of the related project was not assumed. In the case of failure of the project that was partly financed by the Government, the Company is not obligated to pay any such royalties. As the Company does not foresee any revenue from these projects, it believes it is no longer obligated to pay additional royalties, except for a potential repayment of support for assets that are monetized. Under the terms of the Company’s funding from the Government, royalties of 3%-3.5% are payable on sales of products developed from projects funded up to 100% of the amount of the grant received by the Company (dollar linked) with the addition of an annual interest. As of September 30, 2023, the total additional royalty amount that may be payable by the Company, before the additional interest, is approximately $29.4 million ($38.4 million including interest). To date, the Company has paid the IIA approximately $1.1 million in royalties.

NOTE 6 – SUBSEQUENT EVENTS

On October 16, 2023, VBL closed the Merger with Notable Labs, Inc. See Note 1 for additional information.

On October 16, 2023, the Company completed the sale of the VB-601 Asset to Immunewalk Therapeutics Inc., pursuant to the terms of an Asset Purchase Agreement dated as of October 1, 2023, between the Company and Immunewalk. See Note 1 for additional information.

On October 19, 2023, the Company received a written notification from Nasdaq stating that the Company has demonstrated compliance with Nasdaq’s initial listing requirements, including the bid price requirement with respect to the Company’s ordinary shares, and that, accordingly, Nasdaq considers the prior outstanding minimum bid price deficiency matter to be closed. See Note 1 for additional information.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated interim financial statements and related notes included in this Form 10-Q. Our audited financial statements as of and for the year ended December 31, 2022 have been prepared in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP, and our unaudited condensed consolidated interim financial statements for the three and nine months ended September 30, 2023, or the period, have been prepared in accordance with U.S. GAAP, “Interim Reporting,” or ASC 270 and Article 10 of Regulation S-X. Unless stated otherwise, comparisons included herein are made to the three and nine months period ended on September 30, 2022, or the parallel period. Unless the context requires otherwise, references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to the “Company”, “VBL,” “we,” “us,” and “our” refer to Vascular Biogenics Ltd. (now known as Notable Labs, Ltd. following completion of the Merger described below) and its consolidated subsidiary. You should read the “Risk Factors” section of this Quarterly Report on Form 10-Q and the “Risk Factors” section included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a biopharmaceutical company that has historically focused on developing targeted therapies for immune-inflammatory diseases and cancer. Our goal was to provide differentiated targeted therapeutics to address the underlying cause of diseases where treatment options are limited. Our sole product candidate, VB-601, was a targeted antibody for immune-inflammatory applications that has shown disease-modifying activity across multiple preclinical models including multiple sclerosis, rheumatoid arthritis, non-alcoholic steatohepatitis, or NASH, and inflammatory bowel disease. VB-601 was developed using our monocyte targeting technology, or MTT, and is designed to specifically inhibit monocyte migration. We planned to monetize this asset prior to or concurrent to the Merger (as defined below), rather than pursue clinical development internally. On June 30, 2023, we entered into a non-binding term sheet, as amended, for the sale of the VB-601 Asset to Wellbeing Group Ltd., or Wellbeing, or one of its assignees, for total cash consideration of up to $5 million plus royalties. On October 16, 2023, we completed the sale of VB-601 and MOSPD2 related assets (the “VB-601 Asset”) to Immunewalk Therapeutics Inc. (“Immunewalk”) an assignee of Wellbeing.

Merger with Notable Labs, Inc.

On February 22, 2023, we entered into a Merger Agreement, or the Merger Agreement, with Notable Labs, Inc., or Notable, and Vibrant Merger Sub, Inc., or Merger Sub, pursuant to which, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Notable was merged with and into Merger Sub (which transaction is referred to throughout this Quarterly Report as the Merger) at the effective time, or the Effective Time, with Notable continuing after the Merger as the surviving corporation and our wholly-owned subsidiary. The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.

At the Effective Time, each outstanding share of Notable capital stock was converted into the right to receive VBL ordinary shares, or Ordinary Shares, as set forth in the Merger Agreement. Under the exchange ratio formula in the Merger Agreement, immediately following the Effective Time, the former Notable securityholders own approximately 75.2% of the Ordinary Shares outstanding on a fully diluted basis and following adjustment, and VBL securityholders as of immediately prior to the Effective Time own approximately 24.8% of the Ordinary Shares outstanding on a fully diluted basis.

The Merger Agreement also stated that, immediately following the Effective Time, the board of directors of the combined organization will consist of up to seven directors, with one director designated by VBL. Upon the closing of the transaction, the combined organization is being led by Notable’s chief executive officer and executive management team. In connection with the Merger, we amended our articles of association to: (i) effect a 1-for 35 reverse share split (the “Reverse Share Split”), (ii) increase the Company’s registered share capital by NIS 10,000,000 and authorize an additional 1,000,000,000 Ordinary Shares (the “Share Capital Increase”), and (iii) approve the change of the Company’s name to “Notable Labs, Ltd.” (the “Name Change”), effective as of the closing of the Merger, and (iv) a modification to the legal quorum required for the Company’s general meeting of shareholders, which shall consist of at least one (1) shareholder who holds or represents at least 33 1/3% of the voting rights in the Company (the “Quorum Modification”), effective as of the closing of the Merger. Following the effect of the Reverse Share Split, the Company has 34,285,714 authorized Ordinary Shares and NIS 12,000,000 of registered share capital.

The Merger is expected to be a reverse asset acquisition accounted for as a reverse recapitalization, as our assets at the time of the closing of the Merger were primarily cash and cash equivalents, and the historical financial statements of Notable will be our historical financial statements following completion of the Merger.

On October 16, 2023, VBL closed the Merger with Notable Labs, Inc. (“Notable”). In accordance with the terms of the Agreement and Plan of Merger, dated as of February 22, 2023 (the “Merger Agreement”), by and among the Company, Notable and Merger Sub. Pursuant to the Merger Agreement, Merger Sub merged with and into Notable, with Notable surviving as a wholly owned subsidiary of the Company (the “Merger”).

Asset Sale- Modi’in Facility

On February 15, 2023, we entered into an Asset Purchase Agreement, or the Asset Purchase Agreement, providing for the sale of our rights to our former Modi’in manufacturing facility, along with certain tangible assets and equipment located therein for $7.1 million. We used the proceeds from the asset sale to meet the $15.0 million minimum Net Cash closing condition provided in the Merger Agreement and disposed of such rights in contemplation of the Merger (although completion of such asset sale was not a condition to the Merger). We completed the asset sale on March 9, 2023 and retained the right to use a portion of the space for a nominal fee until August 31, 2023, with a potential extension of an additional month. During the nine months ended September 30, 2023, we recorded a capital gain, net of impairment, resulting from the facility sale and other fixed asset sales of approximately $0.2 million.

Sale of VB-601 Asset

On June 30, 2023, we entered into a non-binding term sheet with Wellbeing (as amended on July 25, 2023), or the VB-601 Offer, for the sale of the VB-601 Asset to Wellbeing, or one of its assignees, for total consideration of up to $5 million plus royalties, or the VB-601 Asset Sale. The VB-601 Offer consisted of a $250,000 upfront cash payment to be paid upon closing, up to a total of $4.75 million in clinical and commercial milestones, and a low to mid single digit percentage tiered royalty on annual net sales above $50 million. The VB-601 Offer included a 90-day exclusivity period and other reasonable and customary closing conditions for a transaction of this type and nature. Wellbeing intended to form a new company and recruit Prof. Harats, Dr. Feige, and Mr. Backenroth, or the Interested Parties, as investors and partners to manage the company and develop VB-601 due to their historical knowledge of the program. Due to the involvement of the Interested Parties in the entity that will be moving forward with and developing the VB-601 Asset, the transaction is considered a related party transaction, and required audit committee and board of directors approval and execution of definitive documentation. Our board of directors also resolved that the closing of the VB-601 Asset Sale would be subject to the separate approval of our shareholders at the VBL special meeting. The Interested Parties recused themselves from negotiations between us and Wellbeing regarding the VB-601 Offer. The VB-601 Asset Sale was expected to close immediately prior to or concurrent with the Merger, however, it is not a condition to the closing of the Merger.

On October 16, 2023, we completed the sale of VB-601 and MOSPD2 related assets (the “VB-601 Asset”) to Immunewalk Therapeutics Inc. (“Immunewalk”), an assignee of Wellbeing, pursuant to the terms of an Asset Purchase Agreement dated as of October 1, 2023, between the Company and Immunewalk (the “Asset Purchase Agreement”). Under the Asset Purchase Agreement, Immunewalk agreed to pay an upfront cash payment of $250,000 to the Company at the closing and additional payments of up to $4.75 million upon the achievement of clinical and commercial milestones by Immunewalk, its Affiliates or Licensees. Immunewalk also agreed to pay a low to mid-single digit percentage tiered royalty on aggregate annual Net Sales by Immunewalk or any of its Affiliates above $50 million, for the sale of Covered Products. The Asset Purchase Agreement also clarified that in cases where Immunewalk licenses any of the VB-601 Assets, the Company is entitled to receive a low-teen digit percentage of the License Fees actually received by Immunewalk from a Licensee with respect to Net Sales of such Licensee and adjusted the definition of Net Sales in the Asset Purchase Agreement. In addition, the parties further agreed that in the event of an asset sale by Immunewalk, the royalty rates shall be adjusted as set forth in the Asset Purchase Agreement.

Nasdaq Listing

In August 2022, we received a deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market LLC, or Nasdaq, notifying us that our listed securities did not maintain the minimum bid price requirement of $1.00 per ordinary share for continued listing on the Nasdaq Global Market for a period of 30 consecutive business days as required under Nasdaq Listing Rule 5450(a)(1). The Nasdaq deficiency letter did not result in the immediate delisting of our ordinary shares, and our ordinary shares continue to trade uninterrupted under the symbol “VBLT.” Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we had a compliance period of 180 calendar days, or until February 27, 2023, to regain compliance with Nasdaq’s minimum bid price requirement. If at any time during the compliance period, our ordinary shares had a closing bid price of at least $1.00 for 10 consecutive business days, Nasdaq would have provided us with a written confirmation of compliance and the matter would have closed. We did not regain compliance by February 27, 2023, requested the transfer of our listing to the Nasdaq Capital Market and received an additional 180 day period to regain compliance, or until August 28, 2023. We timely requested a hearing with the Nasdaq Hearings Panel, or the Panel, at which hearing we requested a further extension with which to evidence compliance with all applicable requirements for continued listing on Nasdaq. Our plan to regain compliance included the completion of the proposed Merger and reverse stock split. On October 19, 2023, we received a written notification from Nasdaq stating that the Company has demonstrated compliance with Nasdaq’s initial listing requirements, including the bid price requirement with respect to the Company’s ordinary shares, and that, accordingly, Nasdaq considers the prior outstanding minimum bid price deficiency matter to be closed.

Financial Overview

Revenues and Cost of Revenues

Since inception, we have generated cumulative revenues of approximately $17.4 million primarily from an exclusive license agreement with NanoCarrier Co., Ltd., or NanoCarrier, for the development, commercialization, and supply of ofra-vec in Japan for all indications. In light of the determination to discontinue development of ofra-vec in all indications in the third quarter of 2022, this license agreement has been terminated and we do not expect to generate additional revenues from the achievement of new milestones or royalties under this agreement. The generated revenues comprise upfront and milestone payments. The cost of revenues associated with these revenues was approximately $1.6 million.

We do not expect to receive any revenue from VB-601 or any product candidates that we develop unless and until we obtain regulatory approval and commercialize our products, meet regulatory milestones in relation to our existing collaborative agreements, or enter into new collaborative agreements with third parties.

Research and Development Expenses

Research and development expenses consist of costs incurred for the development of our platform technologies and product candidates. Those expenses include:

Historically, research and development activities were the primary focus of our business. Our research and development expenses have decreased significantly since the termination of the OVAL study and ofra-vec program and embarking on the strategic process that resulted in the proposed Merger and facility sale.

Research and development expenses are recognized as incurred. An intangible asset arising from the development of our product candidates is recognized if certain capitalization conditions are met. As of September 30, 2023, we did not have any capitalized development costs.

We have received grants for the ofra-vec program and another historical program from the Israeli Office of Chief Scientist, which has later transformed to the Israeli Innovation Authority, or IIA, under the Israel Encouragement of Research and Development in Industry, or the Research Law, as part of the research and development programs. The requirements and restrictions for such grants are found in the Research Law. These grants are subject to repayment through future royalty payments on any products resulting from these research and development programs that received grant funding. The total gross amount of grants actually received by us from the IIA, including accrued interest as of September 30, 2023, totaled $38.4 million. On July 19, 2023, the IIA notified us that it has closed all of the grant funded programs.

Under applicable accounting rules, grants from the IIA have been accounted for as an off-set against the related research and development expenses in our financial statements. As a result, our research and development expenses are shown on our financial statements net of the IIA grants.

In August 2022 and May 2023, we received $1.1 million and $1.5 million, respectively, as part of the grant from the European Innovation Council, or EIC, for development of ofra-vec. The grant has been accounted for as an off-set against the related research and development expenses in the financial statements.

General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs for personnel in executive and finance functions such as salaries, benefits and share-based compensation. Other general and administrative expenses include facility costs not otherwise included in research and development expenses, communication expenses, and professional fees for legal services, patents and portfolio maintenance, consulting, commercialization, auditing and accounting services.

Financial Expenses (Income), Net

Financial income is comprised of interest income generated from interest earned on our cash, cash equivalents and short-term bank deposits and gains and losses due to fluctuations in foreign currency exchange rates, mainly in the appreciation and depreciation of the NIS exchange rate against the U.S. dollar.

Financial expenses primarily consist of calculated interest expenses from our lease liabilities and gains and losses due to fluctuations in foreign currency exchange rates.

Taxes on Income

We have not generated taxable income since our inception and had carry forward tax losses as of December 31, 2022 of $250.5 million. We anticipate that we will be able to carry forward these tax losses indefinitely to future tax years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carry forward tax losses.

We recognize full valuation allowance because we do not expect taxable income.

Results of Operations

Comparison of the three and nine-month periods ended September 30, 2023 and 2022 (in thousands):

Revenues

Comparison of three-month periods ended September 30, 2023 and 2022

No revenues were recorded in the three months ended September 30, 2023, compared to $0.5 million for the parallel period in 2022. The decrease is due to the termination of the NanoCarrier license agreement.

No cost of revenues were recorded in the three months ended September 30, 2023, compared to $0.1 million for the parallel period in 2022. The cost of revenues is attributed to the labor costs and other expenses related to the performance obligations that were delivered during the period. Cost of revenues decreased due to the reduction of labor costs associated with the NanoCarrier license agreement.

Comparison of nine-month periods ended September 30, 2023 and 2022

No revenues were recorded in the nine months ended September 30, 2023, compared to $0.7 million for the parallel period in 2022. The decrease is due to the termination of the NanoCarrier license agreement.

Cost of revenues for the nine months ended September 30, 2023 was $0.002 million compared to $0.2 million for the parallel period. Cost of revenues is attributed to the labor costs and other expenses related to the performance obligations that were delivered during the period.

Research and development expenses, net

Comparison of three-month periods ended September 30, 2023 and 2022

Research and development expenses are shown net of grants. Research and development expenses, net, for the three months ended September 30, 2022 were approximately $(0.7) million, compared to approximately $5.9 million in the parallel period, a decrease of approximately $6.6 million. The decrease in research and development expenses, net, in the three-month period was mainly related to the termination of the ofra-vec clinical trials and related activities as well as termination of the research and development labor workforce and the associated reversal of share based compensation expense in 2023.

Comparison of nine-month periods ended September 30, 2023 and 2022

Research and development expenses are shown net of grants. Research and development expenses, net, for the nine months ended September 30, 2023 were approximately $(2.2) million, compared to approximately $20.1 million in the parallel period, a decrease of approximately $22.3 million. The decrease in research and development expenses, net, was mainly related to the termination of the ofra-vec clinical trials and related activities as well as termination of the research and development labor workforce and the associated reversal of share based compensation expense in 2023 in addition to the grant received from the EIC during the second quarter of 2023.

General and administrative expenses

Comparison of three-month periods ended September 30, 2023 and 2022

General and administrative expenses for the three months ended September 30, 2023 were $1.8 million, compared to $3.7 million for the parallel period, a decrease of $1.9 million. This decrease is mainly attributed to reversal of share based compensation expense and a decrease in commercialization activity as well as decrease in payroll as bonuses were not paid in 2023 compared to the parallel period, offset by an increase in legal costs related to the Merger.

Comparison of nine-month periods ended September 30, 2023 and 2022

General and administrative expenses for the nine months ended September 30, 2023 were $7.0 million, compared to $9.8 million for the parallel period, a decrease of $2.9 million. This decrease is mainly attributed to reversal of share based compensation expense and a decrease in commercialization activity as well as decrease in payroll as bonuses were not paid in 2023 compared to the parallel period, offset by an increase in legal costs related to the Merger.

Capital gain, net of impairment on property, plant and equipment

Comparison of three-month periods ended September 30, 2023 and 2022

Capital gain, net of impairment on property, plant and equipment for the three months ended September 30, 2023 was $0.2 million compared to zero in the parallel period. This is attributed to impairment loss due to the write down of the remaining fixed assets in 2023 in preparation for the Merger offset by capital gain on the sale of certain assets and rights as part of the facility sale offset as part of the preparations for the Merger.

Comparison of nine-month periods ended September 30, 2023 and 2022

Capital gain, net of impairment on property, plant and equipment for the nine months ended September 30, 2023 was $0.2 million compared to zero in the parallel period. This is attributed to impairment loss due to the write down of the remaining fixed assets in 2023 in preparation for the Merger offset by capital gain on the sale of certain assets and rights as part of the facility sale offset.

Financial expenses (income), net

Comparison of three-month periods ended September 30, 2023 and 2022

Financial expenses, net, was approximately $0.1 million for the three months ended September 30, 2023 compared to $0.1 million of income for the parallel period. The decrease was primarily attributable to a change in exchange rates and a decrease in deposit income.

Comparison of nine-month periods ended September 30, 2023 and 2022

Financial income, net, was approximately $0.03 million for the nine months ended September 30, 2022 compared to $0.4 million of income for the parallel period. The decrease was primarily attributable to a change in exchange rates and a decrease in deposit income.

Liquidity and Capital Resources

Since inception and through September 30, 2023, VBL has raised an aggregate of $328.5 million to fund operations, including $29.4 million from IIA grants and $2.6 million from the EIC. VBL’s primary uses of cash have historically been to fund working capital requirements and research and development.

Since incorporation through September 30, 2023, Notable Labs, Ltd. and its subsidiaries (hereinafter referred to as “the Post-Merger Company”) incurred losses and negative cash flows from operations mainly attributable to its development efforts and has an accumulated deficit. The Post-Merger Company has financed its operations primarily through the issuance of Preferred Shares and SAFE shares and through the cash inflow as a result of the Merger completed on October 16, 2023. As of the issuance date of these consolidated financial statements, Notable Labs, Ltd.’s cash and investments provide sufficient resources to fund its operations through at least the next 12 months. In order to develop and commercialize any future product candidates if they are granted regulatory approval, Notable Labs, Ltd. is required to obtain further funding through public or private offerings, debt financings, collaboration, licensing arrangements or other sources. Adequate additional funding may not be available to Notable Labs, Ltd. on acceptable terms, or at all. If Notable Labs, Ltd. is unable to raise capital when needed or on attractive terms, it may be forced to delay, reduce or eliminate its research and development programs or commercialization and manufacturing efforts.

As of October 31, 2023, the post-Merger Company had cash and cash equivalents of $14.3 million. The post-Merger Company does not expect to have positive cash flow for the foreseeable future.

The operational focus of the post-Merger Company will be the continued co-development of Fosciclopirox (sponsored by CicloMed) and development of Volasertib (sponsored by Notable).

We expect to continue to incur significant and increasing operating losses at least for the foreseeable future. We do not expect to generate product revenue unless and until we successfully complete development of and obtain regulatory approval for Volasertib and Fosciclopirox, or any other future products. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of planned clinical trials and our expenditures on other research and development activities. Management expects to continue to incur additional substantial losses in the foreseeable future as a result of expanded research and development activities until regulatory approval is granted. Regulatory approval is not guaranteed and may never be obtained.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. In any event, we will require additional capital to obtain regulatory approval for our product candidates. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of our Ordinary Shares. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technology, future revenue streams or research program or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or grant rights to develop and market our product candidate that we would otherwise prefer to develop and market ourselves.

Cash Flows

The following table sets forth the primary sources and uses of cash by VBL for each of the periods set forth below:

Operating Activities

Net cash used in operating activities was approximately $7.6 million for the nine months ended September 30, 2023 and was primarily the result of our $4.6 million net loss in addition to a net increase in working capital of $3.3 million, partially offset by an aggregate of $0.3 million in non-cash charges.

Net cash used in operating activities for the parallel period was $24.9 million and was primarily the result of our $29.0 million net loss, partially offset by a net decrease in working capital of $1.1 million and an aggregate of $3.0 million in non-cash charges.

Investing Activities

Net cash provided by investing activities was approximately $10.0 million for the nine months ended September 30, 2023, and was primarily due to maturation of short-term bank deposits of $3.0 million and the proceeds of the sale of long-term assets of $7.0 million.

Net cash provided by investing activities in the parallel period was $21.3 million. This was primarily due to maturation of short-term bank deposits of $25.1 million, offset by investment in short-term bank deposits of $3.0 million and the purchase of fixed assets of $0.8 million.

Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2023 was $0.001 million and related to the issuance of shares to employees.

Cash provided by financing activities was $0.02 million for the nine months ended September 30, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not required.

Item 4. Controls and Procedures.

Management’s Evaluation of our Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of September 30, 2023. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2023, our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively) concluded that, as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act that occurred during the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

As of the date of this Quarterly Report on Form 10-Q, we are not involved in any material legal proceedings. However, from time to time, we could be subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Regardless of the outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors.

Notable Labs, Ltd. (“Notable”) will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this Quarterly Report on Form 10-Q, you should carefully consider the material risks described below and those described in the section of this Quarterly Report on Form 10-Q titled “Forward-Looking Statements”.

Risks Related to Notable’s Business, Financial Position and Capital Requirements

Notable has a limited operating history that you can use to evaluate it, and the likelihood of Notable’s success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company.

Notable is clinical-stage precision therapeutics company that was incorporated in June 2014 and has a limited operating history. Since inception, Notable’s operations have been primarily limited to acquiring and licensing intellectual property rights, undertaking research and conducting preclinical studies and clinical trials for Notable’s PPMP, and its current drug candidates Volasertib and Fosciclopirox. Notable has not yet obtained regulatory approval for any product candidates. Consequently, any predictions about Notable’s future success or viability, or any evaluation of Notable’s business and prospects, may not be accurate. The likelihood of Notable’s success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company starting a new business enterprise and the highly competitive environment in which Notable will operate.

Notable expects its financial condition and operating results to continue to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond its control. Notable will need to eventually transition from a company with a research and development focus to a company capable of undertaking commercial activities. Notable may encounter unforeseen expenses, difficulties, complications and delays, and may not be successful in such a transition. Since Notable has a limited operating history, Notable cannot assure you that its business will be profitable or that it will ever generate sufficient revenues to meet its expenses and support Notable’s anticipated activities. In addition, there is no guarantee that any of Notable’s product candidates will ever receive FDA approval.

Notable has incurred significant losses since its inception and anticipates that it will continue to incur significant losses for the foreseeable future and Notable’s management’s conclusions based on the required assessment by management per GAAP have raised substantial doubt about Notable’s ability to continue as a going concern.

Notable has devoted most of its financial resources to research and development, including Notable’s preclinical and clinical development activities. To date, Notable has funded its operations primarily through research funding, and through the sale of equity and convertible securities. Notable expects to continue to incur substantial and increased expenses, losses and negative cash flows as it expands its development activities and advances its preclinical programs. If Notable’s product candidates are not successfully developed or commercialized, including because of a lack of capital, or if Notable does not generate enough revenue following marketing approval, it will not achieve profitability and its business may fail. Even if Notable successfully obtains regulatory approval to market a product candidate, its revenues will also depend upon the size of any markets in which its product candidates receive market approval and its ability to achieve sufficient market acceptance and adequate market share for its products.

Notable expects to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses Notable incurs may fluctuate significantly from quarter to quarter. Notable anticipates that its expenses will increase substantially if and as it:

To become and remain profitable, Notable must develop and eventually commercialize one or more drug candidates with significant market potential or license one or more of its drug candidates to an industry partner. This will require Notable to be successful in a range of challenging activities, including completing clinical trials of its drug candidates, publishing its data and findings on its drug candidates with peer reviewed publications, developing commercial scale manufacturing processes, obtaining marketing approval, manufacturing, marketing and selling any current and future drug candidates for which Notable may obtain marketing approval, and satisfying any post-marketing requirements. Notable is only in the preliminary stages of most of these activities and, in some cases, has not yet commenced certain of these activities. Notable may never succeed in any or all of these activities and, even if it does, it may never generate sufficient revenue to achieve profitability.

Because of the numerous risks and uncertainties associated with drug development, Notable is unable to accurately predict the timing or amount of expenses or when, or if, Notable will obtain marketing approval to commercialize any of its drug candidates. If Notable is required by the 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 its current or future drug candidates, its expenses could increase and profitability could be further delayed.

Even if Notable does achieve profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis. Notable’s failure to become and remain profitable would decrease its value and could impair its ability to raise capital, maintain its research and development efforts, expand its business or continue its operations. A decline in the value of Notable also could cause investors to lose all or part of their investment in the company.

As a result, management has included disclosures in Note 1 of the financial statements and Notable’s independent auditor included an explanatory paragraph in its report on its financial statements for the year ended December 31, 2022 with respect to this uncertainty. Notable’s 2022 financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Notable has generated only limited revenue since inception, and may never be profitable.

Notable’s ability to generate revenue and achieve profitability depends on its ability, alone or with strategic alliance partners, to successfully complete the development of, obtain the necessary regulatory approvals for and commercialize the PPMP and Notable’s product candidates. Notable does not anticipate generating significant revenues from sales of its products for the foreseeable future, if ever. Notable’s ability to generate future revenues from product sales depends heavily on its success in: