Form F-1/A Polyrizon Ltd.

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As filed with the Securities and Exchange Commission on February 3, 2023.

Registration No. 333-266745

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

AMENDMENT NO. 4

TO

FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

 

Polyrizon Ltd.
(Exact name of Registrant as specified in its charter)

 

Not Applicable
(Translation of Registrant’s name into English)

 

State of Israel		2834		Not Applicable
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

 

5 Ha-Tidhar Street Raanana, 4366507, Israel Tel: +972-9-93740333		Puglisi & Associates 850 Library Ave., Suite 204 Newark, DE 19711 Tel: (302) 738-6680
(Address, including zip code, and telephone number,		(Name, address, including zip code, and telephone
including area code, of registrant’s principal executive offices)		number, including area code, of agent for service)

 

		Copies to:
David Huberman, Esq. Greenberg Traurig, P.A. One Azrieli Center Round Tower, 30th floor 132 Menachem Begin Rd Tel Aviv 6701101 Telephone: +972 (0) 3.636.6000		Keren Arad-Leibovitz, Adv. Keren Law Firm 5th Floor, Toyota Tower (A) 65 Yigal Alon Street Tel Aviv, Israel Tel: +972.544.275177		Darrin M. Ocasio, Esq. Avital Perlman, Esq. Sichenzia Ross Ference LLP 1185 Avenue of the Americas, 31st Floor New York, NY 10036 Tel: 212.930.9700

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date hereof.

 

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.   ☒

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

 

Emerging growth company ☒

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 7(a)(2)(B) of the Securities Act. ☐

 

†

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. 

 

 

EXPLANATORY NOTE

 

This Registration Statement contains two prospectuses, as set forth below.

 

●

Public Offering Prospectus. A prospectus to be used for the initial public offering of up to 1,350,000 units, or Units, each consisting of one ordinary share, or Ordinary Share, and three warrants, each to purchase one Ordinary Share, or each a Warrant, and up to 1,350,000 pre-funded units, or Pre-Funded Units, each consisting of one pre-funded warrant to purchase one Ordinary Share and three Warrants, each to purchase one Ordinary Share, of the registrant (the “Public Offering Prospectus”) through the underwriter named in the Underwriting section of the Public Offering Prospectus.

 

●

Resale Prospectus. A prospectus to be used for the potential resale by the Selling Shareholders of up to 1,858,803 Ordinary Shares of the registrant held by them and/or issuable to them, collectively, that are not being sold pursuant to the Public Offering Prospectus (the “Resale Prospectus”).

 

The Resale Prospectus is substantively identical to the Public Offering Prospectus, except for the following principal points:

 

●

they contain different front covers;

 

●

all references in the Public Offering Prospectus to “this offering” will be changed to “the IPO,” defined as the underwritten initial public offering of our Units, in the Resale Prospectus;

 

●

all references in the Public Offering Prospectus to “underwriter” will be changed to “underwriter of the IPO” in the Resale Prospectus;

 

●

they contain different “Use of Proceeds” sections;

 

●

they contain different “Summary — The Offering” sections;

 

●

the section “Shares Eligible For Future Sale — Selling Shareholders Resale Prospectus” from the Public Offering Prospectus is deleted from the Resale Prospectus;

 

●

the “Underwriting” section from the Public Offering Prospectus is deleted from the Resale Prospectus and a “Plan of Distribution” section is inserted in its place;

 

●

the “Legal Matters” section in the Resale Prospectus deletes the reference to counsel for the underwriter; and

 

●

they contain different back covers.

 

The Registrant has included in this Registration Statement a set of alternate pages after the back cover page of the Public Offering Prospectus (the “Alternate Pages”) to reflect the foregoing differences in the Resale Prospectus as compared to the Public Offering Prospectus. The Public Offering Prospectus will exclude the Alternate Pages and will be used for the public offering by the registrant. The Resale Prospectus will be substantively identical to the Public Offering Prospectus except for the addition or substitution of the Alternate Pages and will be used for the resale offering by the Selling Shareholders of the balance of their Ordinary Shares that are not being sold pursuant to the Public Offering Prospectus.

 

 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS

SUBJECT TO COMPLETION,

DATED FEBRUARY 3, 2023

 

1,350,000 Units

Each Consisting of One Ordinary Share

and Three Warrants, each to Purchase One Ordinary Share

 

1,350,000 Pre-Funded Units Each Consisting of
One Pre-Funded Warrant to Purchase One Ordinary Share and
Three Warrants, Each to Purchase One Ordinary Share

 

 

Polyrizon Ltd.

 

This is the initial public offering of Polyrizon Ltd. We are offering 1,350,000 units, or Units, each consisting of one of our ordinary shares, no par value per share, or Ordinary Shares, and three warrants, each to purchase one of our Ordinary Shares, or each, a Warrant. We anticipate that the initial public offering price per Unit will be between $5.20 and $7.20 and the assumed exercise price of each Warrant included in the Unit will be $5.825 (based on an assumed public offering price of $6.20 per Unit, the midpoint of the price range of the Units) per Ordinary Share (with such exercise price equal to the public offering price per Unit less $0.125 per Warrant included in the Unit). The Units have no stand-alone rights and will not be certificated or issued as stand-alone securities. The Ordinary Shares and Warrants are immediately separable and will be issued separately in this offering. The Warrants offered hereby will be immediately exercisable on the date of issuance and will expire five years from the date of issuance. 

  

We are also offering to those purchasers, if any, whose purchase of Units in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding Ordinary Shares immediately following the consummation of this offering, the opportunity to purchase, if they so choose, up to 1,350,000 pre-funded units, or, each, a Pre-Funded Unit, in lieu of the Units that would otherwise result in ownership in excess of 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding Ordinary Shares, with each Pre-Funded Unit consisting of a pre-funded warrant to purchase one Ordinary Share and three Warrants, each to purchase one Ordinary Share. The purchase price of each Pre-Funded Unit will equal the price per Unit, minus $0.001, and the exercise price of each Pre-Funded Warrant included in the Pre-Funded Unit will be $0.001 per Ordinary Share. The Pre-Funded Units have no stand-alone rights and will not be certificated or issued as stand-alone securities. The Pre-Funded Warrants and Warrants are immediately separable and will be issued separately in this offering. There can be no assurance that we will sell any of the Pre-Funded Units being offered. The Pre-Funded Warrants offered hereby will be immediately exercisable and may be exercised at any time until exercised in full.

  

For each Pre-Funded Unit we sell, the number of Units we are offering will be decreased on a one-for-one basis. Because we will issue three Warrants as part of each Unit or Pre-Funded Unit, the number of Warrants sold in this offering will not change as a result of a change in the mix of the Units and Pre-Funded Units sold.

  

We have applied to list our Ordinary Shares and our Warrants on The Nasdaq Capital Market, or Nasdaq, under the symbol “PLRZ” and “PLRZW”, respectively. It is a condition to the closing of this offering that our Ordinary Shares and Warrants shall have been approved for listing on Nasdaq. We do not intend to apply to list the Pre-Funded Warrants on any securities exchange or other nationally recognized trading system.

 

We are both an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (or the JOBS Act), and a “foreign private issuer,” as defined under the U.S. federal securities law and are subject to reduced public company reporting requirements. See “Prospectus Summary – Implications of Being an Emerging Growth Company and Foreign Private Issuer” for additional information.

 

In addition, we have registered an aggregate of 1,858,803 Ordinary Shares for resale by certain shareholders, or the Selling Shareholders, by means of a separate prospectus. Other than certain affiliates of the registrant that have entered into lock-up agreements with the underwriter, the Selling Shareholders are not subject to any lock-up or leakage agreements and have the right to sell the shares being registered hereby at any time. We will pay the expenses associated with the sale of the Ordinary Shares by the Selling Shareholders pursuant to this prospectus. Our registration of the Ordinary Shares by the Selling Shareholders covered by this prospectus does not mean that the Selling Shareholders will issue, offer or sell, as applicable, any of the Ordinary Shares. The Selling Shareholders may offer and sell the Ordinary Shares covered by this prospectus in a number of different ways and at varying prices. We provide more information in the section entitled “Plan of Distribution.”

 

 

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 14.

 

Neither the Securities and Exchange Commission (or the SEC) nor any state or other foreign securities commission has approved nor disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

Per Unit

Per Pre-Funded Unit

Total

Public offering price

$

$

$

Underwriting discounts and commissions (1)

$

$

$

Proceeds to us (before expenses) (2)

$

$

$

 

(1)

Does not include a non-accountable expense allowance equal to 1.0% of the initial public offering price payable to the underwriter. In addition, we have agreed to issue warrants to the underwriter, or the Underwriter Warrants, in an amount equal to 6% of the aggregate number of Ordinary Shares sold in this offering, but excluding the shares sold through the exercise of the over-allotment option). See the section titled “Underwriting” beginning on page 146 of this prospectus for additional disclosure regarding underwriter compensation and offering expenses.

 

(2)

Does not include proceeds from the exercise of the Warrants or Underwriter Warrants or Pre-Funded Warrants in cash, if any.

 

We have granted the underwriter an option to purchase from us, up to an additional 202,500 Ordinary Shares and/or up to an additional 607,500 Warrants and/or up to an additional 202,500 Pre-Funded Warrants, within 45 days from the date of this prospectus to cover over-allotments, if any. The purchase price to be paid per additional Ordinary Share or Pre-Funded Warrant will be equal to the public offering price of one Unit or Pre-Funded Unit (less the $0.01 purchase price allocated to each Warrant), as applicable, less the underwriting discounts and commissions. The underwriter may exercise the over-allotment option with respect to the Ordinary Shares, Pre-Funded Warrants or Warrants only, or any combination thereof. If the underwriter exercises the option in full, the total underwriting discounts and commissions and management fees payable will be $770,040 and the total proceeds to us, before expenses, will be $8,855,460.

 

The underwriter expects to deliver the Ordinary Shares on or about       , 2023. 

 

Sole Book-Running Manager

 

Aegis Capital Corp.

 

The date of this prospectus is    , 2023. 

 

 

TABLE OF CONTENTS

 

PROSPECTUS SUMMARY		1
SUMMARY FINANCIAL DATA		13
RISK FACTORS		14
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		61
USE OF PROCEEDS		62
DIVIDEND POLICY		63
CAPITALIZATION		64
DILUTION		65
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OPERATIONS		67
BUSINESS		74
MANAGEMENT		106
PRINCIPAL SHAREHOLDERS		124
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS		125
DESCRIPTION OF SHARE CAPITAL		127
DESCRIPTION OF SECURITIES WE ARE OFFERING		132
SHARES ELIGIBLE FOR FUTURE SALE		134
SELLING SHAREHOLDERS		136
TAXATION		138
UNDERWRITING		146
EXPENSES		149
LEGAL MATTERS		149
EXPERTS		149
ENFORCEMENT OF CIVIL LIABILITIES		150
WHERE YOU CAN FIND MORE INFORMATION		151
INDEX TO FINANCIAL STATEMENTS		F-1

  

 

Neither we, the Selling Shareholders nor the underwriter have authorized anyone to provide you with information that is different from that contained in this prospectus, any amendment or supplement to this prospectus, or in any free writing prospectus we may authorize to be delivered or made available to you. Neither we, the Selling Shareholders nor the underwriter take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We, the Selling Shareholders and the underwriter are offering to sell Ordinary Shares and seeking offers to purchase Ordinary Shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front of this prospectus, regardless of the time of delivery of this prospectus or any sale of Ordinary Shares. Our business, financial condition, results of operations and prospects may have changed since the date on the front cover of this prospectus.

 

Through and including                        , 2023 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

Neither we, the Selling Shareholders nor any of the underwriter have taken any action to permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

 

Capture and Contain and Trap and Target are trademarks of ours that we use in this prospectus. This prospectus also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames referred to in this prospectus often appear without the ® or ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to our trademark and tradenames.

 

The terms “shekel,” “Israeli shekel” and “NIS” refer to New Israeli Shekels, the lawful currency of the State of Israel, and the terms “dollar,” “U.S. dollar” or “$” refer to United States dollars, the lawful currency of the United States of America. All references to “shares” in this prospectus refer to Ordinary Shares of Polyrizon Ltd., no par value per share.

 

On September 29, 2022, the Company effected (i) a reverse stock split of our issued and outstanding shares at a ratio of one-for-8.80, pursuant to which holders of our shares received one Ordinary Share for every 8.80 Ordinary Shares held, (ii) cancelled the par value of our Ordinary Shares and Preferred Shares, and (iii) increased its authorized share capital to 19,752,250 Ordinary Shares. Unless the context expressly dictates otherwise, all references to share and per share amounts referred to herein reflect the reverse stock split.

 

On December 19, 2022, following shareholder approval at an extraordinary general shareholders meeting, the Company effected the issuance of 858,148 bonus shares (equivalent to a forward share split at a ratio of 1.25-for-1), or the Forward Share Split. The authorized share capital of the Company was increased to facilitate the Forward Share Split. Unless the context expressly dictates otherwise, all references to share and per share amounts referred to herein reflect the Forward Share Split.

 

MARKET, INDUSTRY AND OTHER DATA

 

This prospectus contains estimates, projections and other information concerning our industry, our business, and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

 

In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Special Note Regarding Forward-Looking Statements.”

 

 

 

 

RISK FACTORS

 

Investing in our Securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, in addition to the other information set forth in this prospectus, including the financial statements and the related notes included elsewhere in this prospectus, before purchasing our Ordinary Shares or Warrants. If any of the following risks actually occurs, our business, financial condition, cash flows and results of operations could be negatively impacted. In that case, the trading price of our Ordinary Shares or Warrants would likely decline and you might lose all or part of your investment.

 

Risks Related to Our Financial Condition and Capital Requirements

 

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

 

We are a development stage biotech company. We have incurred operating losses since our inception, including operating losses of $572,000 and $151,000 for the six months ended June 30, 2022 and June 30, 2021, respectively. As of June 30, 2022, we had an accumulated deficit of $2.7 million. We have devoted substantially all of our financial resources to designing and developing our C&C product candidates, including preclinical studies and clinical development and providing general and administrative support for these operations. We expect that our expenses and operating losses will increase for the foreseeable future as we continue clinical development of our C&C product candidates to provide a barrier against allergens, influenza and COVID-19 from contacting the nasal epithelial tissue and develop other product candidates using our T&T platform technology for nasal delivery of APIs. Our ability to ultimately achieve revenues and profitability is dependent upon our ability to successfully complete the development of our C&C product candidates and any future product candidates, obtain necessary regulatory approvals for and successfully manufacture, market and commercialize our product candidates.

 

We anticipate that our expenses will increase substantially based on a number of factors, including to the extent that we:

 

	●	Begin our planned clinical trial of our C&C product candidates in the second quarter of 2024;
	●	seek regulatory and marketing approvals for any product candidates that successfully complete clinical trials;
	●	advance our preclinical and research and development programs;
	●	identify, assess, acquire, license and/or develop other product candidates;
	●	manufacture current good manufacturing practices, or cGMP, material for clinical trials or potential commercial sales;
	●	establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval;
	●	hire personnel and invest in additional infrastructure to support our operations as a public company and expand our product candidates development;
	●	enter into agreements to license intellectual property from third parties;
	●	develop, maintain, protect and expand our intellectual property portfolio; and
	●	experience any delays or encounter issues with respect to any of the above, including, but not limited to, failed trials, complex results, safety issues or other regulatory challenges that require longer follow-up of existing clinical trials, additional major clinical trials or additional supportive studies in order to pursue marketing approval.

 

To date, we have financed our operations primarily through the sale of equity securities, convertible loans made by certain of our shareholders, royalty-bearing and non-royalty bearing grants that we received from the Israeli Innovation Authority, or the IIA. The amount of any future operating losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity or debt financings, strategic collaborations or grants. Even if we obtain regulatory approval to market one or more product candidates, our future revenue will depend upon the size of any markets in which such product candidates receive approval and our ability to achieve sufficient market acceptance, pricing, reimbursement from third-party payors for such product candidates. Further, the operating losses that we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. Other unanticipated costs may also arise.

 

 

We have never generated any revenue from product candidates sales and may never be profitable.

 

We have no product approved for marketing in any jurisdiction and we have never generated any revenue from product candidates sales. Our ability to generate revenue and achieve profitability depends on our ability, alone or with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory and marketing approvals necessary to commercialize, our product candidates or any future product candidates. We do not anticipate generating revenue from product candidates sales for at least the next year. Our ability to generate future revenue from product candidates sales will depend heavily on our ability to:

 

●

complete research and preclinical and clinical development of our product candidates and any future product candidates in a timely and successful manner, including our C&C product candidates to provide a barrier against viruses and allergens from contacting the nasal epithelial tissue.

 

●

obtain regulatory and marketing approval for any product candidates for which we complete clinical trials;

 

●

maintain and enhance a commercially viable, sustainable, scalable, reproducible and transferable manufacturing process for our technology product candidates and any future product candidates that is compliant with cGMPs;

 

●

establish and maintain supply and, if applicable, manufacturing relationships with third parties that can provide, in both amount and quality, adequate product candidates to support clinical development and the market demand for our technology product candidates and any future product candidates, if and when approved;

 

●

launch and commercialize any product candidates for which we obtain regulatory and marketing approval, either directly by establishing a sales force, marketing and distribution infrastructure, and/or with collaborators or distributors;

 

●

expose and educate physicians and other medical professionals to use our product candidates;

 

●

obtain market acceptance, if and when approved, of our product candidates and any future product candidates from the medical community and third-party payors;

 

●

ensure our product candidates are approved for reimbursement from governmental agencies, healthcare providers and insurers in jurisdictions where they have been approved for marketing;

 

●

address any competing technological and market developments that impact our product candidates and any future product candidates or their prospective usage by medical professionals;

 

●

identify, assess, acquire and/or develop new product candidates;

 

●

negotiate favorable terms in any collaboration, licensing or other arrangements into which we may enter and perform our obligations under such collaborations;

 

●

maintain, protect and expand our portfolio of intellectual property rights, including patents, patent applications, trade secrets and know-how;

 

●

avoid and defend against third-party interference or infringement claims;

 

●

attract, hire and retain qualified personnel; and

 

●

locate and lease or acquire suitable facilities to support our clinical development, manufacturing facilities and commercial expansion.

 

Even if our product candidates or any future product candidates are approved for marketing and sale, we anticipate incurring significant incremental costs associated with commercializing such product candidates. Our expenses could increase beyond expectations if we are required by the FDA, the EMA or other regulatory agencies, domestic or foreign, or ethical committees in medical centers, to change our manufacturing processes or assays or to perform clinical, nonclinical or other types of studies in addition to those that we currently anticipate. Even if we are successful in obtaining regulatory approvals to market our technology product candidates or any future product candidates, our revenue earned from such product candidates will be dependent in part upon the breadth of the product candidates label, the size of the markets in the territories for which we gain regulatory approval for such product candidates, the accepted price for such product candidates, our ability to obtain reimbursement for such product candidates at any price, whether we own the commercial rights for that territory in which such product candidates have been approved and the expenses associated with manufacturing and marketing such product candidates for such markets. Therefore, we may not generate significant revenue from the sale of such product candidates, even if approved. Further, if we are not able to generate significant revenue from the sale of our approved product candidates, we may be forced to curtail or cease our operations. Due to the numerous risks and uncertainties involved in product candidates development, it is difficult to predict the timing or amount of increased expenses, or when, or if, we will be able to achieve or maintain profitability.

 

 

We expect that we will need to raise substantial additional funding, which may not be available on acceptable terms, or at all. Failure to obtain funding on acceptable terms and on a timely basis may require us to curtail, delay or discontinue our product candidates development efforts or other operations.

 

We are currently advancing our C&C product candidates through pre-clinical and clinical development in multiple indications, in order to obtain regulatory approvals. Developing product candidates is expensive, and we expect our research and development expenses to increase substantially in connection with our ongoing activities, particularly as we advance product candidates through clinical trials and regulatory approvals. Furthermore, we expect to incur additional ongoing costs associated with operating as a public company.

 

To date, we have financed our operations primarily through the sale of equity securities. As of June 30, 2022, we had cash, cash equivalents of $195,000. We will require significant additional financing to fund our operations. Our future funding requirements will depend on many factors, including but not limited to:

 

●

the progress, results and costs of our anticipated clinical trials of our C&C product candidate and any future product candidates;

 

●

the cost, timing and outcomes of regulatory review of our product candidates and any future product candidates;

 

●

the scope, progress, results and costs of product candidates development, laboratory testing, manufacturing, preclinical development and clinical trials for any other product candidates that we may develop or otherwise obtain in the future;

 

●

the cost of our future activities, including establishing sales, marketing and distribution capabilities for any product candidates in any particular geography where we receive marketing approval for such product candidates;

 

●

the terms and timing of any collaborative, licensing and other arrangements that we may establish;

 

●

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and

 

●

the level of revenue, if any, received from commercial sales of any product candidates for which we receive marketing approval.

 

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product candidates sales. In addition, our product candidates, if and when approved, may not achieve commercial success. Our product candidates revenues, if any, will be derived from or based on sales of product candidates that may not be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

 

We cannot guarantee that financing will be available in sufficient amounts or on terms acceptable to us, if at all, and the terms of any financing may adversely affect the interests or rights of our shareholders. Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. Further, our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic.

 

 

To the extent that we raise capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of such securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. If we raise funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish certain rights to our technologies or our product candidates, or to grant licenses on terms that are not favorable to us.

 

If we are unable to obtain funding on acceptable terms and on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research, development or manufacturing programs or the commercialization of any approved product candidates, or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.

 

Our financial statements contain an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern, which could prevent us from obtaining new financing on reasonable terms or at all.

 

Our audited financial statements for the year ended December 31, 2021, contain an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We have net losses in each year since our inception, including a net loss of approximately $592,000 for the six months ended June 30, 2022 and $711,000 for the year ended December 31, 2021.  These events and conditions, along with other matters, indicate that a material uncertainty exists that may cast significant doubt on our ability to continue as a going concern. The financial statements for 2021 and condensed financial statements for June 2022 do not include any adjustments that might result from the outcome of this uncertainty. This going concern opinion could materially limit our ability to raise additional funds through the issuance of equity or debt securities or otherwise. Further financial statements may include an explanatory paragraph with respect to our ability to continue as a going concern. Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through debt or equity financing. We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not available, we may be required to delay, reduce the scope of, or eliminate research or development plans for, or commercialization efforts with respect to our product candidates. This may raise substantial doubts about our ability to continue as a going concern.

 

Risks Related to the Discovery, Development and Clinical Testing of Product Candidates

 

We depend on enrollment of patients in our upcoming clinical trials in order to continue development of our product candidates.

 

We intend conduct clinical trials as part of the development of our product candidates. Our anticipated time to data in these trials is subject to our ability to recruit sufficient eligible patients and the number and size of cohorts that will need to be enrolled prior to observing activity, if achieved at all for the dose escalation and expansion arms of the relevant trials. There can be no assurance that we will complete enrollment or have data from the trials when we anticipate or at all. 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 that are in line with our inclusions and exclusion criteria and our ability to monitor these patients as required.

 

We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons. Patient enrollment is affected by many factors including the size and nature of the patient population, the eligibility criteria for the trial, the design of the clinical trial, the size of the patient population required for analysis of the trial’s primary endpoints, the proximity of patients to study sites, our ability to recruit clinical trial investigators with the appropriate competencies and experience, the number of enrolling clinical sites, our ability to obtain and maintain patient consents, the risk that patients enrolled in clinical trials will drop out of the trials before completion, and competing clinical trials (including other clinical trials that we are conducting or will conduct in the future) and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, or competing drugs against the same target as well as any new drugs that may be approved for the indications we are investigating.

 

 

Additionally, we must compete for clinical sites, clinicians 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 product candidates. While we are only in the early stages of pre-clinical development for our T&T platform, the foregoing and similar regulatory risks may impact our business, results of operations and prospects as we progress with the development of our T&T platform.

 

We may not receive, or may be delayed in receiving, the necessary clearances or approvals for our C&C product candidates or future product candidates, and failure to timely obtain necessary clearances or approvals for our C&C product candidates or future product candidates would adversely affect our ability to grow our business.

 

In the United States, before we can market a new medical device, or a new use of, new claim for or significant modification to an existing product candidates, we must first receive either clearance under Section 510(k) of the Federal Food, Drug and Cosmetic Act, or FFDCA, or approval of a pre-market approval application, or a PMA, from the FDA, unless an exemption applies. In the clearance process for Section 510(k) of the FFDCA, or Section 510(k), before a device may be marketed, the FDA must determine that a proposed device is “substantially equivalent” to a legally-marketed “predicate” device, which is defined as a device that has been previously cleared through the 510(k) process, a device that was legally marketed prior to May 28, 1976 (pre-amendments device), a device that was originally on the U.S. market pursuant to an approved PMA and later down-classified, or a 510(k)-exempt device. To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics that do not raise different questions of safety or effectiveness than the predicate device. Clinical data are sometimes required to support substantial equivalence. In the process of obtaining PMA approval, the FDA must determine that a proposed device is safe and effective for its intended use based, in part, on extensive data, including, but not limited to, technical, pre-clinical, clinical trial, manufacturing and labeling data. For a PMA, the FDA is making a determination that the probable benefits must be determined to outweigh the probable risk of the device for the labeled indication, and there must be a reasonable assurance of safety and effectiveness.

 

Modifications to product candidates that are approved through a PMA application generally require FDA approval. Similarly, certain modifications made to product candidates cleared through a 510(k) may require a new 510(k) clearance. Both the PMA approval and the 510(k) clearance process can be expensive, lengthy and uncertain. The FDA’s 510(k) clearance process usually takes from three to 12 months, but can last longer. The process of obtaining a PMA is much more costly and uncertain than the 510(k) clearance process and generally takes from one to three years, or even longer, from the time the application is submitted to the FDA. In addition, a PMA generally requires the performance of one or more clinical trials. Despite the time, effort and cost, a device may not be approved or cleared by the FDA. Any delay or failure to obtain necessary regulatory clearances or approvals could harm our business. Furthermore, even if we are granted regulatory clearances or approvals, they may include significant limitations on the indications for use of the device or other restrictions or requirements, which may limit the market for the device.

  

In the United States, we expect to take a multi-step approach to the regulatory clearance process. The review process is an iterative process and may be more costly and time consuming than we expect and we may not ultimately be successful in completing the review process and our 510 (k) application may not be cleared by the FDA in a timely manner or at all. If cleared, any modification to our C&C product candidate that has not been previously cleared may require us to submit a new 510(k) application and obtain clearance, or submit a PMA and obtain FDA approval prior to implementing the change. Specifically, any modification to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design or manufacture, requires a new 510(k) clearance or, possibly, approval of a PMA. The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision. The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary. We may make modifications or add additional features in the future that we believe do not require a new 510(k) clearance or approval of a PMA. If the FDA disagrees with our determination and requires us to submit new 510(k) notifications or PMA applications for modifications to our previously cleared product candidates for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product candidates until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties. If the FDA requires us to go through a lengthier, more rigorous examination for future product candidates or modifications to existing product candidates than we had expected, product candidates introductions or modifications could be delayed or canceled, which could adversely affect our ability to grow our business.

 

 

The FDA can delay, limit or deny clearance or approval of a medical device for many reasons, including:

 

	●	our inability to demonstrate to the satisfaction of the FDA or the applicable regulatory entity or notified body that our product candidates are safe or effective for their intended uses;
	●	the disagreement of the FDA or the applicable foreign regulatory body with the design or the interpretation of data from pre- clinical studies or clinical trials;
	●	serious and unexpected adverse effects experienced by participants in our clinical trials;
	●	the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required;
	●	our inability to demonstrate that the clinical and other benefits of the device outweigh the risks;
	●	the manufacturing process or facilities we use may not meet applicable requirements; and
	●	the potential for approval policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance or approval.

 

In order to sell our product candidates in member states of the European Union, or the EU, our product candidates must comply with the general safety and performance requirements of the EU Medical Devices Regulation (Regulation (EU) No 2017/745), which repeals and replaces the EU Medical Devices Directive (Council Directive 93/42/EEC). Compliance with these requirements is a prerequisite to be able to affix the European Conformity, or CE, mark to our product candidates, without which they cannot be sold or marketed in the EU. All medical devices placed on the market in the EU must meet the general safety and performance requirements laid down in Annex I to the EU Medical Devices Regulation including the requirement that a medical device must be designed and manufactured in such a way that, during normal conditions of use, it is suitable for its intended purpose. Medical devices must be safe and effective and must not compromise the clinical condition or safety of patients, or the safety and health of users and – where applicable – other persons, provided that any risks which may be associated with their use constitute acceptable risks when weighed against the benefits to the patient and are compatible with a high level of protection of health and safety, taking into account the generally acknowledged state of the art. The European Commission has adopted various standards applicable to medical devices. These include standards governing common requirements, such as sterilization and safety of medical electrical equipment and product standards for certain types of medical devices. There are also harmonized standards relating to design and manufacture. While not mandatory, compliance with these standards is viewed as the easiest way to satisfy the general safety and performance requirements as a practical matter, as it creates a rebuttable presumption that the device satisfies the general safety and performance requirements.

 

To demonstrate compliance with the general safety and performance requirements we must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification. As a general rule, demonstration of conformity of medical devices and their manufacturers with the general safety and performance requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the product candidates during normal conditions of use. Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence. Except for low-risk medical devices (Class I), where the manufacturer can issue an EC Declaration of Conformity based on a self-assessment of the conformity of its product candidates with the general safety and performance requirements (except for any parts which relate to sterility, metrology or reuse aspects), a conformity assessment procedure requires the intervention of an organization accredited or designated by a member state of the EU to conduct conformity assessments, or a notified body. Depending on the relevant conformity assessment procedure, the notified body would typically audit and examine the technical file and the quality system for the manufacture, design and final inspection of our devices. If satisfied that the relevant product candidates conforms to the relevant essential requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the CE Mark to the device, which allows the device to be placed on the market throughout the EU. If we fail to comply with applicable EU laws and regulations, and corresponding EU member state laws, we would be unable to affix the CE mark to our product candidates, which would prevent us from selling them within the EU.

 

The aforementioned EU rules are generally applicable in the European Economic Area, or EEA, which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland. Non-compliance with the above requirements would also prevent us from selling our product candidates in these three countries.

 

 

We do not plan to conduct a pre-submission meeting with the FDA’s CDRH to confirm the potential for the Class II medical device path under a de novo classification request for our PL-15 and PL-16 product candidates until after the completion of this initial public offering. If we are denied submission under the de novo pathway, it may require us to go through a different pathway, such as a PMA pathway, which may result in a lengthier approval process for our devices.

 

We do not plan to conduct a pre-submission meeting with the FDA’s CDRH to confirm the potential for the Class II medical device path under a de novo classification request for our PL-15 and PL-16 product candidates until after the completion of the initial public offering. In the event the FDA does not agree with our regulatory assessments for our PL-15 and PL-16 product candidates under a Class II De Novo pathway, the FDA may require us to go through a lengthier, more rigorous examination than we had expected. This examination could involve pursuing a PMA, which is the FDA process of scientific and regulatory review to evaluate the safety and effectiveness of Class III medical devices. PMA submissions must comply with far more rigorous standards compared to 510k or De Novo to prove device safety and effectiveness. Typically, Class III devices require both laboratory testing and clinical trials that include human participants. PMA is the most rigorous type of device marketing application required by the FDA. PMA approval is based on a determination by the FDA that the PMA contains sufficient valid scientific evidence to ensure that the device is safe and effective for its intended use(s). A PMA application generally includes extensive information about the device including the results of clinical testing conducted on the device and a detailed description of the manufacturing process. If we are required to pursue a PMA, the introduction of our product candidates into the market could be delayed significantly.

 

Legislative or regulatory reforms in the United States or the European Union may make it more difficult and costly for us to obtain regulatory clearances or approvals for our product candidates or to manufacture, market or distribute our product candidates after clearance or approval is obtained. 

 

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulation of medical devices. In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval or clearance of our future product candidates under development or impact our ability to modify our currently cleared product candidates on a timely basis. Over the last several years, the FDA has proposed reforms to its 510(k) clearance process, and such proposals could include increased requirements for clinical data and a longer review period, or could make it more difficult for manufacturers to utilize the 510(k) clearance process for their product candidates. For example, in November 2018, FDA officials announced forthcoming steps that the FDA intends to take to modernize the premarket notification pathway under Section 510(k) of the FDCA. Among other things, the FDA announced that it planned to develop proposals to drive manufacturers utilizing the 510(k) pathway toward the use of newer predicates devices. These proposals included plans to potentially sunset certain older devices that were used as predicates devices under the 510(k) clearance pathway, and to potentially publish a list of devices that have been cleared on the basis of demonstrated substantial equivalence to predicate devices that are more than 10 years old. In May 2019, the FDA solicited public feedback on these proposals. The FDA requested public feedback on whether it should consider certain actions that might require new authority, such as whether to sunset certain older devices that were used as predicates devices under the 510 (k) clearance pathway. These proposals have not yet been finalized or adopted, and the FDA may work with Congress to implement such proposals through legislation. Accordingly, it is unclear the extent to which any proposals, if adopted, could impose additional regulatory requirements on us that could delay our ability to obtain new 510(k) clearances, increase the costs of compliance, or restrict our ability to maintain our current clearances, or otherwise create competition that may negatively affect our business.

 

More recently, in September 2019, the FDA finalized guidance describing an optional “safety and performance based” premarket review pathway for manufacturers of “certain, well-understood device types” to demonstrate substantial equivalence under the 510(k) clearance pathway by showing that such device meets objective safety and performance criteria established by the FDA, thereby obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process. The FDA intends to develop and maintain a list device types appropriate for the “safety and performance based” pathway and will continue to develop product -specific guidance documents that identify the performance criteria for each such device type, as well as the testing methods recommended in the guidance documents, where feasible. The FDA may establish performance criteria for classes of devices for which we or our competitors seek or currently have received clearance, and it is unclear the extent to which such performance standards, if established, could impact our ability to obtain new 510(k) clearances or otherwise create competition that may negatively affect our business.

 

In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our product candidates. Any new statutes, regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of any future product candidates or make it more difficult to obtain clearance or approval for, manufacture, market or distribute our product candidates. We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes could, among other things, require: additional testing prior to obtaining clearance or approval; changes to manufacturing methods; recall, replacement or discontinuance of our product candidates; or additional record keeping.

 

The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be promulgated that could prevent, limit or delay regulatory clearance or approval of our future product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. 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 or clearance that we may have obtained and we may not achieve or sustain profitability.

 

 

On April 5, 2017, the European Parliament passed the Medical Devices Regulation (Regulation 2017/745), which repeals and replaces the EU Medical Devices Directive. Unlike directives, which must be implemented into the national laws of the EEA member states, the regulations would be directly applicable, i.e., without the need for adoption of EEA member state laws implementing them, in all EEA member states and are intended to eliminate current differences in the regulation of medical devices among EEA member States. The Medical Devices Regulation, among other things, is intended to establish a uniform, transparent, predictable and sustainable regulatory framework across the EEA for medical devices and ensure a high level of safety and health while supporting innovation. The Medical Devices Regulation has become applicable as of May 26, 2021. Among other things, the new Medical Devices Regulation:

 

	●	strengthens the rules on placing devices on the market and reinforce surveillance once they are available;
	●	establishes explicit provisions on manufacturers’ responsibilities for follow-up regarding the quality, performance and safety of devices placed on the market;
	●	improves the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number;
	●	sets up a central database to provide patients, healthcare professionals and the public with comprehensive information on product available in the EU; and
	●	Provides strengthened rules for the assessment of certain high-risk devices, which may have to undergo an additional check by experts before they are placed on the market.

 

These modifications may have an effect on the way we conduct our business in the EEA.

 

We are heavily dependent on the success of our C&C product candidates, including obtaining regulatory approval to market our C&C product candidates in the United States and the European Union.

 

To date, we have invested substantially all of our efforts and financial resources to research and develop our C&C technology, including conducting preclinical studies, developing and securing our intellectual property portfolio for our product candidates and technology. Our future success is dependent on our ability to successfully develop, obtain regulatory approval for and commercialize one or more of our current and future product candidates. Our product candidates’ marketability is subject to significant risks associated with successfully completing current and future clinical trials, including:

 

	●	our ability to initiate our clinical trials;
	●	Success in in-vitro cell culture assays or other non-clinical experiments or animal studies does not ensure that later, clinical trials will be successful nor does it predict final results.
	●	acceptance by the FDA, EMA or other regulatory agencies of our strategies for seeking regulatory approvals for our C&C product candidates and any future product candidates, including our proposed indications, primary and secondary endpoint assessments and measurements, safety evaluations and regulatory pathways;
	●	the acceptance by the FDA, EMA or other regulatory agencies of the number, design, size, conduct and implementation of our clinical trials, our trial protocols and the interpretation of data from preclinical studies or clinical trials;

 

 

	●	our ability to successfully initiate and complete clinical trials of our C&C product candidates and any future product candidates, including timely patient enrollment and acceptable safety and efficacy data and our ability to demonstrate the safety and efficacy of the product candidates undergoing such clinical trials;
	●	the willingness of the FDA, EMA or other regulatory agencies to schedule an advisory committee meeting in a timely manner in connection with our regulatory submissions, if such advisory committee meetings are required;
	●	the recommendation of the FDA’s advisory committee to approve our applications to market our C&C product candidates and any future product candidates in the United States, and the EMA’s approval to market our C&C product candidates in the European Union, if such advisory committee reviews are scheduled, without limiting the approved labeling, specifications, distribution or use of the product candidates, or imposing other restrictions;
	●	the satisfaction of the FDA, EMA or other regulatory agencies with the safety and efficacy of C&C product candidates and any future product candidates;
	●	the prevalence and severity of adverse events associated with C&C product candidates and any future product candidates;
	●	the timely and satisfactory performance by third-party contractors, trial sites and principal investigators of their obligations in relation to our clinical trials;
	●	our success in educating medical professionals and patients about the benefits, administration and use of our C&C product candidates and any future product candidates, if approved;
	●	the availability, perceived advantages, relative cost, safety and efficacy of alternative and competing product for the indications addressed by our C&C product candidates and any future product candidates;
	●	the effectiveness of our marketing, sales and distribution strategy, and operations, as well as that of any current and future licensees;
	●	our ability to scale, validate and maintain a commercially viable manufacturing process that is cGMP-compliant;
	●	our ability to obtain, protect and enforce our intellectual property rights with respect to our C&C product candidates, any future product candidates and our C&C technology; and
	●	changes to regulatory guidelines.

 

Many of these clinical, regulatory and commercial risks are beyond our control. Accordingly, we cannot assure you that we will be able to advance our C&C product candidates and any future product candidates through clinical development, or to obtain regulatory approval of or commercialize any product candidates. If we fail to achieve these objectives or overcome the challenges presented above, we could experience significant delays or an inability to successfully commercialize our C&C product candidates and any future product candidates. Accordingly, we may not be able to generate sufficient revenues through the sale of our product candidates to enable us to continue our business.

 

Additionally, approval of a product candidate in the United States by the FDA does not ensure approval of such product candidate by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. We may never obtain approval outside of the United States, which would limit our market opportunities and adversely affect our business.

 

 

Regulatory approval processes of the FDA, EMA and comparable foreign regulatory authorities are lengthy, time-consuming and unpredictable, and if we are ultimately unable to obtain regulatory approval for our current product candidates or any future product candidates, our business may fail.

 

The research, development, testing, manufacturing, labeling, packaging, approval, promotion, advertising, storage, recordkeeping, marketing, distribution, post-approval monitoring and reporting and export and import of drug product candidates are subject to extensive regulation by the FDA, the EMA and by foreign regulatory authorities in other countries. These regulations differ from country to country. To gain approval to market our T&T platform product candidates and future product candidates, we must provide data from well-controlled clinical trials that adequately demonstrate the safety and efficacy of the product candidates for the intended indication to the satisfaction of the FDA, EMA or other regulatory authority. We have not yet obtained regulatory approval to market any product in the United States or any other jurisdiction. The FDA, EMA or other regulatory agencies can delay, limit or deny approval of our T&T platform product candidates or any future product candidate for many reasons, including:

 

	●	regulatory requests for additional analyses, reports, data, non-clinical and preclinical studies and clinical trials;
	●	our inability to demonstrate that a product candidate is safe and effective for the target indication to the satisfaction of the FDA, EMA or other regulatory agencies;
	●	the FDA’s, EMA’s, or other regulatory agencies’ disagreement with our trial protocol, the interpretation of data from preclinical studies or clinical trials, or adequacy of the conduct and control of clinical trials;
	●	clinical holds, other regulatory objections to commencing or continuing a clinical trial or the inability to obtain regulatory approval to commence a clinical trial in countries that require such approvals;
	●	the population studied in the clinical trial may not be sufficiently broad or representative to assess safety in the patient population for which we seek approval;
	●	unfavorable or inconclusive results of clinical trials and supportive non-clinical studies, including unfavorable results regarding safety or efficacy of a product candidate observed in clinical trials;
	●	our inability to demonstrate that clinical or other benefits of a product candidate outweighs any safety or other perceived risks;
	●	any determination that a clinical trial presents unacceptable health risks to subjects;
	●	our inability to obtain approval from institutional review boards, or IRBs, to conduct clinical trials at their respective sites;
	●	the FDA’s determination that the regulatory pathways under FFDCA Section 505(b)(2), or Section 505(b)(2), or Section 510(k) are not available for a product candidate;
	●	the non-approval of the formulation, labeling or the specifications of a product candidate;
	●	the failure to accept the manufacturing processes or facilities at of third-party manufacturers with which we contract;
	●	the potential for approval policies or regulations of the FDA, EMA or other regulatory agencies to significantly change in a manner rendering our clinical data insufficient for approval; or
	●	resistance to approval from the advisory committees of the FDA, EMA or other regulatory agencies for any reason including safety or efficacy concerns.

 

In the United States, we will be required to submit an NDA to obtain FDA approval before marketing our T&T platform product candidate. An NDA must include extensive preclinical and clinical data and supporting information to establish the product candidate’s safety and efficacy for each desired indication. In the case of an NDA covered by Section 505(b)(2), we may rely in part on data not developed by us and for which we have not obtained a right of reference or use, including published scientific literature or the FDA’s findings of safety and/or effectiveness for a previously approved drug. The NDA must also include significant information regarding the chemistry, manufacturing and controls for the product candidates. The FDA may further inspect our manufacturing facilities to ensure that the facilities can manufacture any product candidate and any product candidates, if and when approved, in compliance with the applicable regulatory requirements, as well as inspect our clinical trial sites to ensure that our trials are properly conducted. Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and approval may not be obtained. Upon submission of an NDA, the FDA must make an initial determination that the application is sufficiently complete to accept the submission for filing. We cannot be certain that any submissions will be accepted for filing and review by the FDA, or ultimately be approved. If the application is not accepted for review or approval, the FDA may require that we conduct additional clinical or preclinical trials, or take other actions before it will reconsider our application. If the FDA requires additional trials or data, we would incur increased costs and delays in the marketing approval process, which may require us to expend more resources than we have available.

 

 

Regulatory authorities outside of the United States, such as in the European Union, also have requirements for approval of drugs for commercial sale with which we must comply prior to marketing in those areas. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of a product candidate. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and obtaining regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. However, the failure to obtain regulatory approval in one jurisdiction could have a negative impact on our ability to obtain approval in a different jurisdiction. Approval processes vary among countries and can involve additional product candidate testing and validation and additional administrative review periods. Seeking foreign regulatory approval could require additional non-clinical studies or clinical trials, which could be costly and time consuming. Foreign regulatory approval may include all of the risks associated with obtaining FDA approval. For all of these reasons, if we seek foreign regulatory approval for any product candidate, we may not obtain such approvals on a timely basis, if at all.

 

Even if we eventually complete clinical testing and receive approval of any regulatory filing for a product candidate, the FDA may grant approval contingent on the performance of costly and potentially time-consuming additional post-approval clinical trials or subject to contraindications, black box warnings, restrictive surveillance or Risk Evaluation and Mitigation Strategies, or REMS. Further, the FDA, EMA or other foreign regulatory authorities may also approve a product candidate for a more limited indication or a narrower patient population than we originally requested, and these regulatory authorities may not approve the labeling that we believe is necessary or desirable for the successful commercialization of any product candidate. Following any approval for commercial sale of a product candidate, certain changes to the product candidates, such as changes in manufacturing processes and additional labeling claims, as well as new safety information, will be subject to additional FDA notification, or review and approval. Also, regulatory approval for any product candidate may be withdrawn. To the extent we seek regulatory approval in foreign countries, we may face challenges similar to those described above with regulatory authorities in applicable jurisdictions. Any delay in obtaining, or inability to obtain, applicable regulatory approval for our T&T platform product candidates or any future product candidate would delay or prevent commercialization of such product candidate and would thus negatively impact our business, results of operations and prospects. While we are only in the early stages of pre-clinical development for our T&T platform, the foregoing and similar regulatory risks may impact our business, results of operations and prospects as we progress with the development of our T&T platform.

 

Clinical drug development is difficult to design and implement and involves a lengthy and expensive process with uncertain outcomes.

 

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Additionally, we are only in the early stages of pre-clinical development for our T&T platform. A failure of one or more of our clinical trials can occur at any time during the clinical trial process. We do not know whether future clinical trials, if any, will begin on time, need to be redesigned, enroll an adequate number of patients on time or be completed on schedule, if at all. Clinical trials can be delayed, suspended or terminated for a variety of reasons, including failure to:

 

	●	generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials;
	●	obtain regulatory approval, or feedback on trial design, in order to commence a trial;
	●	identify, recruit and train suitable clinical investigators;
	●	reach agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among CROs and clinical trial sites, and have such CROs and sites effect the proper and timely conduct of our clinical trials;
	●	obtain and maintain IRB approval at each clinical trial site;
	●	identify, recruit and enroll suitable patients to participate in a trial;
	●	have a sufficient number of patients complete a trial or return for post-treatment follow-up;
	●	ensure clinical investigators and clinical trial sites observe trial protocol or continue to participate in a trial;
	●	address any patient safety concerns that arise during the course of a trial;
	●	address any conflicts with new or existing laws or regulations;
	●	add a sufficient number of clinical trial sites;
	●	manufacture sufficient quantities at the required quality of product candidate for use in clinical trials; or
	●	raise sufficient capital to fund a trial.

 

 

We may also experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize any product candidate, including:

 

	●	we may receive feedback from regulatory authorities that requires us to modify the design of our clinical trials;
	●	clinical trials of a product candidate may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon drug development programs;
	●	the number of patients required for clinical trials of a product candidate may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;
	●	our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
	●	regulators or IRBs may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site or amend a trial protocol;
	●	we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites and CROs;
	●	we or our investigators might have to suspend or terminate clinical trials of a product candidate for various reasons, including non- compliance with regulatory requirements, a finding that a product candidate have undesirable side effects or other unexpected characteristics, or a finding that the participants are being exposed to unacceptable health risks;
	●	the cost of clinical trials of a product candidate may be greater than we anticipate;
	●	the supply or quality of a product candidate or other materials necessary to conduct clinical trials of such product candidate may be insufficient or inadequate;
	●	there may be changes in government regulations or administrative actions;
	●	a product candidate may have undesirable adverse effects or other unexpected characteristics;
	●	we may not be able to demonstrate that a produce candidate’s clinical and other benefits outweigh its safety risks;
	●	we may not be able to demonstrate that a product candidate provides an advantage over current standards of care of future competitive therapies in development;
	●	regulators may revise the requirements for approving a product candidate, or such requirements may not be as we anticipate; and
	●	any future collaborators that conduct clinical trials may face any of the above issues, and may conduct clinical trials in ways they view as advantageous to them but that are suboptimal for us.

 

In addition, disruptions caused by the COVID-19 pandemic has caused and may continue to increase the likelihood that we encounter such difficulties in initiating, enrolling, conducting or completing our planned and ongoing clinical trials. We may also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the trial’s data safety monitoring board, by the FDA, EMA or other regulatory agencies. Such authorities may suspend or terminate one or more of our clinical trials due to a number of factors, including our failure to conduct the clinical trial in accordance with relevant regulatory requirements or clinical protocols, inspection of the clinical trial operations or site by the FDA, EMA or other regulatory agencies resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

 

Further, conducting clinical trials outside of the United States, as we plan to do for our product candidates and any future product candidates, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in the countries outside of the United States to adhere to 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.

 

 

If we experience delays in completing any clinical trial of a product candidate or successfully obtaining regulatory approval, the commercial prospects of such product candidate may be harmed, and our ability to generate product candidates revenues from such product candidate 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 candidates sales and generate revenues. Any of these occurrences may significantly harm our business and financial condition. 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 FDA does not conclude that our T&T platform product candidate satisfies the requirements under Section 505(b)(2) of the FFDCA, or Section 505(b)(2), or if we are unable to utilize the hybrid application pathway in the European Union, or if the requirements are not as we expect, the approval pathway for our T&T platform product candidates will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful.

 

While we are only in the early stages of pre-clinical development for our T&T platform product candidates, we intend to utilize the FDA’s Section 505(b)(2) regulatory pathway, and the hybrid application pathway in the European Union, which is analogous to the Section 505(b)(2) pathway, to seek approval of our T&T platform product candidates. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2) to the FFDCA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from trials or studies that were not conducted by or for the applicant, and for which the applicant has not received a right of reference or use from the person by or for whom the investigations were conducted, which we believe could expedite the development program for our T&T platform product candidates by potentially decreasing the amount of preclinical and clinical data that we would need to generate in order to obtain FDA approval. However, while we believe that our T&T platform product candidates is a reformulation of an already-approved drug and, therefore, will be eligible for submission of an NDA under Section 505(b)(2), the FDA may disagree and determine that our T&T platform product candidates is not eligible for review under such regulatory pathway.

 

If we are unable to pursue these regulatory pathways as anticipated, we may need to conduct additional preclinical experiments and 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 T&T platform product candidates, and complications and risks associated with T&T platform product candidates, would likely increase significantly. Moreover, inability to pursue the Section 505(b)(2) or similar regulatory pathway could result in new competitive products reaching the market more quickly than T&T platform product candidates or any future product candidates, which would likely harm our competitive position and prospects. Even if we are allowed to pursue the Section 505(b)(2) or similar regulatory pathway, T&T platform product candidates may not receive the requisite approvals for commercialization, and there is no guarantee the 505(b)(2) or similar pathway would ultimately lead to faster product candidates development or earlier approval.

 

In addition, notwithstanding the approval of a number of productsby the FDA under Section 505(b)(2) over the last few years, certain competitors and others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA’s interpretation of Section 505(b)(2) is successfully challenged, the FDA may be required to change its 505(b)(2) policies and practices, which could delay or even prevent the FDA from approving any NDA that we submit under Section 505(b)(2). In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in approval of our potential future NDAs for up to 30 months depending on the outcome of any litigation. It is also not uncommon for a manufacturer of an approved productto file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing product candidates. If successful, such petitions can significantly delay, or even prevent, the approval of the new product candidates. However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition.

 

Moreover, even if our T&T platform product candidates or any future product candidates are approved under the Section 505(b)(2) pathway, as the case may be, the approval may be subject to limitations on the indicated uses for which the product candidates may be marketed or to other conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product candidates.

 

 

Our C&C and T&T technologies are novel technologies, which makes it difficult to accurately and reliably predict the time and cost of development and of subsequently obtaining regulatory approval of our C&C and T&T technologies product candidates or any future product candidates.

 

We have concentrated our efforts and product candidates research on our technologies, and our future success depends on the successful development of these technologies and product candidates based on them. There can be no assurance that any development problems we experience in the future related to our product candidates will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may be unable to maintain and further develop sustainable, reproducible and scalable manufacturing processes, or transfer these processes to collaborators, which may prevent us from completing our clinical studies or commercializing our product candidates on a timely or profitable basis, if at all. To our knowledge, no regulatory authority has granted approval to any person or entity, including us, to market and commercialize therapeutics using our novel delivery system. We may never receive approval to market and commercialize any product candidates that utilize our technologies.

 

As an organization, we have not previously conducted pivotal clinical trials, and we may be unable to do so for any product candidates we may develop, including our T&T platform product candidates.

 

We will need to successfully complete pivotal clinical trials in order to obtain the approval of the FDA, EMA or other regulatory agencies to market our T&T platform product candidates or any future product candidates. Carrying out later-stage clinical trials and the submission of a successful NDA is a complicated process. As an organization, we have not previously conducted any later stage or pivotal clinical trials and have limited experience in preparing, submitting and prosecuting regulatory filings. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials, including our ongoing Phase 3 trials, in a way that leads to marketing approval of our T&T platform product candidates. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trials, could prevent us from or delay us in commercializing our T&T platform product candidates, which are in early stages of pre-clinical development. See “Risks Related to Our Reliance on Third Parties.” We rely on third parties to conduct certain elements of our preclinical and clinical trials and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates.

 

We may find it difficult to enroll patients in our clinical trials due to various reasons, including possible disruption due to the COVID-19 pandemic, which could delay or prevent us from proceeding with such trials.

 

Identifying and qualifying patients to participate in our clinical trials is critical to our success. The timing of our clinical trials depends in part on the speed at which we can recruit patients to participate in testing our product candidates, and we may experience delays in our clinical trials if we encounter difficulties in enrollment. Patient enrollment and retention in clinical trials depends on many factors, including the size of the patient population, the nature of the trial protocol, our ability to recruit clinical trial investigators with the appropriate competencies and experience, the existing body of safety and efficacy data with respect to the study drug, the number and nature of competing product candidates and ongoing clinical trials of competing drugs for the same indication, the proximity of patients to clinical sites, clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any drugs that may be approved for the indications we are investigating, the eligibility criteria for the trials, our ability to obtain and maintain patient consents and the risk that patients enrolled in clinical trials will drop out of the trials before completion. We may experience disruptions in patient enrollment due to the COVID-19 pandemic for our planned clinical trials during 2023 for our C&C product candidates, including difficulties in initiating clinical sites and enrolling and retaining participants, the diversion of healthcare resources away from clinical trials and challenges related to travel or quarantine policies that may be implemented.

 

 

We may not be able to identify, recruit and enroll a sufficient number of patients to complete our clinical trials because of the perceived risks and benefits of the product candidate under study, the availability and efficacy of competing therapies and clinical trials, the proximity and availability of clinical trial sites for prospective patients and the patient referral practices of physicians. We may also face challenges in identifying trial sites and enrolling patients in global trials such as our ongoing and planned clinical trials in the second quarter of 2024 for our C&C product candidates. If patients are unwilling to participate in our trials for any reason, the timeline for recruiting patients, conducting trials and obtaining regulatory approval of potential product candidates will be delayed.

 

Our product candidates and the administration of 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 significant negative consequences following marketing approval, if any.

 

Undesirable side effects, including toxicology, caused by product candidates or any future product candidates, or the drugs encapsulated by such 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, EMA or other regulatory agencies. Results of our trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an event, our clinical studies could be suspended or terminated, and the FDA, EMA or other regulatory agencies could order us to cease further development of or deny or withdraw approval of our product candidates for any or all targeted indications. Moreover, during the conduct of clinical trials, patients report changes in their health, including illnesses, injuries and discomforts, to their study doctor. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions.

 

Drug-related, formulation-related and administration-related side effects could affect patient recruitment, the ability of enrolled patients to complete the clinical trials or result in potential product candidates liability claims, which could exceed our clinical trial insurance coverage. We do not currently have product candidates liability insurance and do not anticipate obtaining product candidates liability insurance until such time as we have received FDA, EMA or other comparable foreign authority marketing approval for one of our product candidates and such product candidates is being provided to patients outside of clinical trials.

 

Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such product candidates, a number of potentially significant negative consequences could result, including but not limited to:

 

	●	regulatory authorities may suspend or withdraw approvals of such product candidates;
	●	regulatory authorities may require additional warnings on the label, such as a “black box” warning or contraindication;
	●	additional restrictions may be imposed on the marketing of the particular product candidates or the manufacturing processes for the product candidates or any component thereof;
	●	we may be required to create a REMS, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers and/or other elements to assure safe use;
	●	we may be required to recall a product candidates, change the way a product candidate is administered or conduct additional clinical trials;
	●	we could be sued and held liable for harm caused to patients;
	●	the product candidates may become less competitive; and
	●	our reputation may suffer.

 

While we are only in the early stages of pre-clinical development for our T&T platform, any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.

 

 

Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval to commercialize any of our product candidates, and the approval may be for a more narrow indication than we seek or be subject to other limitations or restrictions that limit its commercial profile.

 

We cannot commercialize a product candidate until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if our current or future product candidates meet safety and efficacy endpoints in pivotal clinical trials, the regulatory authorities may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. This may include approval of a product candidate for more limited indications than requested or they may impose significant limitations in the form of warnings. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory authority policy during the period of product candidates development, clinical trials and the review process.

 

Regulatory authorities also may approve a product candidate for more limited indications than requested or they may impose significant limitations in the form of warnings or a REMS. These regulatory authorities may require precautions or contra-indications with respect to conditions of use or they may grant approval subject to the performance of costly post-marketing clinical trials. In addition, regulatory authorities may not approve the labeling claims that are necessary or desirable for the successful commercialization of any of our product candidates. While we are only in the early stages of pre-clinical development for our T&T platform, the foregoing and similar regulatory risks may impact our business, results of operations and prospects as we progress with the development of our T&T platform.

 

Even if we obtain regulatory approval for a product candidate, our product candidates and business will remain subject to ongoing regulatory obligations and review.

 

While we are only in the early stages of pre-clinical development for our T&T platform, if our product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies and submission of safety, efficacy and other post- market information, including both federal and state requirements in the United States and comparable requirements outside of the United States. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.

 

Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the cleared intended use(s) for which the product candidates may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a REMS as a condition of approval of our product candidates, which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. We will also be required to report certain adverse reactions and production problems, if any, to the FDA, EMA or other regulatory agencies and to comply with requirements concerning advertising and promotion for our product candidates. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product candidates’s approved label. As such, we may not promote our product candidates for indications or uses for which they do not have FDA, EMA or other regulatory agency approval. The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product candidates, product candidates labeling, or manufacturing process. We could also be asked to conduct post-marketing clinical trials to verify the safety and efficacy of our product candidates in general or in specific patient subsets. An unsuccessful post-marketing trial or failure to complete such a clinical trial could result in the withdrawal of marketing approval. Furthermore, any new legislation addressing drug safety issues could result in delays in product candidates development or commercialization or increased costs to assure compliance. Foreign regulatory authorities impose similar requirements. If a regulatory agency discovers previously unknown problems with a product candidates, such as adverse events of unanticipated severity or frequency, or disagrees with the promotion, marketing or labeling of a product candidates, such regulatory agency may impose restrictions on that product candidates or us, including requiring withdrawal of the product candidates from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things:

 

●

issue warning letters asserting that we are in violation of the law;

 

●

seek an injunction or impose civil or criminal penalties or monetary fines;

 

 

	●	suspend or withdraw regulatory approval;
	●	suspend any of our ongoing clinical trials;
	●	refuse to approve pending applications or supplements to approved applications submitted by us or our strategic partners;
	●	restrict the marketing or manufacturing of our product candidates;
	●	seize or detain product candidates, or require a product candidates recall;
	●	refuse to permit the import or export of our product candidates; or
	●	refuse to allow us to enter into government contracts.

 

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our product candidates. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.

 

The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. 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 and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

 

We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad.

 

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified product candidates from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.

 

The ability of the FDA to review and approve new product candidates can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new drugs or modifications to approved drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

 

Separately, in response to the COVID-19 pandemic, in March 2020, the FDA announced the postponement of most foreign and routine surveillance inspections of domestic manufacturing facilities, and only restarted domestic inspections on a risk-based basis in July 2020. Regulatory authorities outside the United States have adopted similar restrictions or other policy measures in response to the COVID-19 pandemic.

 

 

If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

  

We may be subject, directly or indirectly, to U.S. federal and state healthcare fraud and abuse laws, false claims laws, physician payment transparency laws and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

 

Our current and future operations may be directly or indirectly through our relationships with U.S. healthcare providers, patients and other persons and entities, subject to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain our business or financial arrangements and relationships through which we research, market, sell and distribute our product candidates in the United States. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

 

●

The U.S. Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, receiving or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any item or service reimbursable, in whole or in part, under Medicare, Medicaid or other U.S. federal healthcare programs. The U.S. Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers, among others, on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, but the exceptions and safe harbors are drawn narrowly and require strict compliance in order to offer protection.

 

	●	The U.S. federal false claims laws, including the False Claims Act, or FCA, and civil monetary penalties laws, which prohibit any person or entity from, among other things, knowingly presenting, or causing to be presented, a false, fictitious or fraudulent claim for payment to, or approval by, the U.S. federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the U.S. federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government. In addition, manufacturers can be held liable under the FCA even when they do not submit claims directly to government third-party payors if they are deemed to “cause” the submission of false or fraudulent claims. The FCA also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery. FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties per false claim or statement. Government enforcement agencies and private whistleblowers have investigated pharmaceutical companies for or asserted liability under the FCA for a variety of alleged promotional and marketing activities, such as providing free productsto customers with the expectation that the customers would bill federal programs for the products; providing consulting fees and other benefits to physicians to induce them to prescribe products; engaging in promotion for “off-label” uses; and submitting inflated best price information to the Medicaid Rebate Program.
	●	The U.S. Health Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
	●	The Physician Payments Sunshine Act, enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the ACA, imposes, among other things, annual reporting requirements for covered manufacturers for certain payments and “transfers of value” provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report such information regarding payments and transfers of value provided during the previous year to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified nurse anesthetists and certified nurse midwives.

 

 

	●	HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, impose, among other things, specified requirements relating to the privacy, security and transmission of individually identifiable health information held by covered entities, which include certain healthcare providers, health plans and healthcare clearinghouses, and their business associates, which include individuals or entities that perform services for covered entities that involve the creation, use, maintenance or disclosure of, individually identifiable health information as well as their covered subcontractors. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in U.S. federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
	●	European and other foreign law equivalents of each of the laws, including reporting requirements detailing interactions with and payments to healthcare providers.

 

Many states have analogous state laws and regulations, such as state anti-kickback and false claims laws, that may apply to our business practices, including but not limited to, research, distribution, sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers. In addition, certain states require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government. Certain states and local jurisdictions require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers and register pharmaceutical sales representatives. Additionally, certain states also require pharmaceutical companies to file reports relating to pricing information or marketing expenditures and have laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

 

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. In addition, the ACA has strengthened these laws. For example, health care reform legislation, has among other things, amended the intent requirement of the U.S. Anti-Kickback statute and certain criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. Moreover, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

 

Ensuring that our internal operations and business arrangements with third parties comply with applicable healthcare laws and regulations will likely be costly. It is possible that governmental authorities will conclude that our business practices, including arrangements we may have with physicians and other healthcare providers, some of whom may receive stock options as compensation for services provided, do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, possible exclusion from government funded healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations, any of which could substantially disrupt our operations. If the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

 

 

Legislative or regulatory healthcare reforms in the United States may make it more difficult and costly for us to obtain regulatory clearance or approval of our product candidates and to produce, market and distribute our product candidates after clearance or approval is obtained.

 

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory clearance or approval, manufacture and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our product candidates. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our product candidates. We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes could, among other things, require:

 

●

changes to manufacturing methods;

 

●

change in protocol design;

 

●

additional treatment arm (control);

 

●

recall, replacement, or discontinuance of one or more of our product candidates; and

 

●

additional recordkeeping.

 

In addition, in the United States, there have been a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our product candidates profitably. The pharmaceutical industry in the United States, as an example, has been affected by the passage of the ACA, which, among other things, imposed new fees on entities that manufacture or import certain branded prescription drugs and expanded pharmaceutical manufacturer obligations to provide discounts and rebates to certain government programs. There have been executive, judicial and Congressional challenges to certain aspects of the ACA. Concurrently, Congress considered legislation to repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the ACA have been enacted. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminated the health insurer tax. On December 14, 2018, a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. The United States Supreme Court is currently reviewing this case, but it is unknown when a decision will be reached. Although the Supreme Court has not yet ruled on the constitutionality of the ACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how the Supreme Court ruling, other such litigation and the healthcare reform measures of the Biden administration will impact the ACA and our business.

 

Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. For example, COVID-19 relief legislation suspended the 2% Medicare sequester from May 1, 2020 through March 31, 2021.

 

 

Further, there has been particular and increasing legislative and enforcement interest in the United States with respect to drug pricing practices in recent years, particularly with respect to drugs that have been subject to relatively large price increases over relatively short time periods. There have been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that attempt to implement several of the administration’s proposals. The FDA also released a final rule, effective November 30, 2020, implementing a portion of the importation executive order providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health and Human Services, or HHS, finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed pending review by the Biden administration until March 22, 2021. On November 20, 2020, CMS issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule. It is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives. Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical products pricing, including price or patient reimbursement constraints, discounts, restrictions on certain products access and marketing cost disclosure and transparency measures, and in some cases, designed to encourage importation from other countries and bulk purchasing. In the future, there will likely continue to be proposals relating to the reform of the U.S. healthcare system, some of which could further limit coverage and reimbursement of drug products, including our product candidates. It is possible that additional governmental action is taken in response to the COVID-19 pandemic, but there can be no certainty regarding what, if any, such action may be. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. Our results of operations could be adversely affected by the ACA and by other health care reforms that may be enacted or adopted in the future.

 

We face intense competition in an environment of rapid technological change and the possibility that our competitors may develop products and drug delivery systems that are similar, more advanced or more effective than ours, which may adversely affect our financial condition and our ability to successfully market or commercialize our product candidates.

 

The medical device and pharmaceutical industry in which we operate is intensely competitive and subject to rapid and significant technological change. We are currently aware of various existing therapies in the market and in development that may in the future compete with our product candidates, for drug delivery mechanisms that T&T technology to deliver APIs at the local level. Other approaches may also emerge for the prevention or treatment of any of the indications on which we focus, and new technologies may emerge in localized drug delivery.

 

We have competitors both in the United States and internationally, including major multinational medical device and pharmaceutical companies. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis products that are more effective or less costly than any product candidate that we may develop, or achieve earlier patent protection, regulatory approval, product candidates commercialization and market penetration than we do. Additionally, technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors.

 

 

Even if we obtain and maintain approval for our T&T platform product candidates or our other product candidates from the FDA, we may never obtain approval outside of the United States, which would limit our market opportunities and adversely affect our business.

 

Approval of a product candidate in the United States by the FDA does not ensure approval of such product candidate by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. However, the failure to obtain approval from the FDA or other regulatory authorities may negatively impact our ability to obtain approval in other foreign countries. Sales of our T&T platform product candidates or our other product candidates outside of the United States will be subject to foreign regulatory requirements governing clinical trials and marketing approval. Even if the FDA grants marketing approval for a product candidate, comparable regulatory authorities of foreign countries also must approve the manufacturing and marketing of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and more onerous than, those in the United States, including additional preclinical studies or clinical trials. In many countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that country. In some cases, the price that we intend to charge for our product candidates, if approved, is also subject to approval.

 

We intend to submit a marketing authorization application to the EMA for approval of our C&C product candidates in the European Union, but obtaining such approval from the European Commission following the opinion of the EMA is a lengthy and expensive process. Even if a product candidate is approved, the applicable regulatory agency may limit the indications for which the product candidates may be marketed, require extensive warnings on the product candidates labeling or require expensive and time-consuming additional clinical trials or reporting as conditions of approval. Regulatory authorities in countries outside of the United States and the European Union also have requirements for approval of product candidates with which we must comply prior to marketing in those countries. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our product candidates in certain countries.

 

Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. Also, regulatory approval for a product candidate may be withdrawn. If we fail to comply with the regulatory requirements, our target market will be reduced and our ability to realize the full market potential of our T&T platform product candidates or our other product candidates will be harmed and our business, financial condition, results of operations and prospects will be adversely affected.

 

The misuse or off-label use of our product candidates may harm our reputation in the marketplace, result in injuries that lead to product candidates liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.

 

Prescription drugs may be promoted only for the approved indications in accordance with the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off- label uses may be subject to significant liability. We will train our marketing and sales personnel to not promote our product candidates, if approved, for any off-label uses. We cannot, however, prevent a physician from using our product candidates off-label, when in the physician’s independent professional medical judgment he or she deems it appropriate.

 

If the FDA, EMA or any foreign regulatory body determines that our promotional materials or training constitute promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance or imposition of an untitled letter, which is used for violators that do not necessitate a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action under other regulatory authority, such as false claims laws, if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.

 

 

Risks Related to our Reliance on Third Parties

 

We will rely on third parties to conduct certain elements of our preclinical studies and clinical trials and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates.

 

We will rely upon third-party vendors, including CROs, to monitor and manage data for our ongoing preclinical studies and clinical trials. If our 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. We will rely on these CROs for execution of our preclinical studies and clinical trials, and we control only certain aspects of their activities. Nevertheless, we will be 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 vendors and CROs does not relieve us of our regulatory responsibilities. We and our CROs and other vendors will be required to comply with good clinical practice, cGMP, the Helsinki Declaration, the International Conference on Harmonization Guideline for Good Clinical Practice, applicable European Commission Directives on Clinical Trials, laws and regulations applicable to clinical trials conducted in other territories, and good laboratory practices, or GLP, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the EEA, and comparable foreign regulatory authorities for all of our product candidates in clinical development. Regulatory authorities enforce these regulations through periodic inspections of study sponsors, principal investigators, study sites and other contractors. If we or any of our CROs or vendors fail to comply with applicable regulations, including Good Clinical Practice, or GCP, and cGMP regulations, the clinical data generated in our clinical studies may be deemed unreliable and the FDA, EMA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

 

If any of our relationships with these third-party CROs or vendors terminate, we may not be able to enter into arrangements with alternative CROs or vendors or do so on commercially reasonable terms. 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 ongoing clinical, nonclinical 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. CROs may also generate higher costs than anticipated, which could adversely affect our results of operations and the commercial prospects for our product candidates, increase our costs and delay our ability to generate revenue.

 

Replacing 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. Though we carefully manage our relationships with our CROs, we may encounter similar challenges or delays in the future, which could have a material adverse impact on our business, financial condition and prospects.

 

 

Independent clinical investigators and CROs that we will engage to conduct our clinical trials may not devote sufficient time or attention to our clinical trials or be able to repeat their past success.

 

We will depend on third parties, including independent clinical investigators and CROs, to conduct our clinical trials. CROs may also assist us in the collection and analysis of data. There is a limited number of third-party service providers and vendors that specialize or have the expertise required to achieve our business objectives. Identifying, qualifying and managing performance of third-party service providers can be difficult, time consuming and cause delays in our development programs.

 

These investigators and CROs will not be our employees and we will not be able to control, other than through contract, the amount of resources, including time, which they devote to our product candidates and clinical trials. If independent investigators or CROs fail to devote sufficient resources to the development of our product candidates, or if their performance is substandard, it may delay or compromise the prospects for approval and commercialization of any product candidates that we develop. Further, the performance of our CROs may also be interrupted by the ongoing COVID-19 pandemic, including due to travel or quarantine policies, heightened exposure of CRO staff who are healthcare providers to COVID-19 patients or prioritization of resources toward the COVID-19 pandemic.

 

Investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or other regulatory authorities. The FDA or other regulatory authorities may conclude that a financial relationship between us and an investigator has created a conflict of interest or otherwise affected interpretation of the trial. The FDA or other regulatory authorities may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval or rejection of our marketing applications by the FDA or other regulatory authorities, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.

 

In addition, the use of third-party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated. Further, the FDA and other regulatory authorities require that we comply with standards, commonly referred to as GCP, for conducting, recording and reporting clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial subjects are protected. Failure of clinical investigators or CROs to meet their obligations to us or comply with GCP procedures could adversely affect the clinical data, the outcome of the clinical studies or the development of our product candidates and harm our business.

 

We rely on third parties to manufacture the raw materials that we use to create our product candidates. Our business could be harmed if existing and prospective third parties fail to provide us with sufficient quantities of these materials and product candidates or fail to do so at acceptable quality levels or prices.

 

We rely on third party suppliers for certain raw materials necessary to manufacture our product candidates for our preclinical studies and clinical trials. We do not have any control over the availability of raw materials. If we or our manufacturers are unable to purchase these raw materials on acceptable terms, at sufficient quality levels, or in adequate quantities, if at all, the development and commercialization of our product candidates or any future product candidates, would be delayed or there would be a shortage in supply, which would impair our ability to meet our development objectives for our product candidates or generate revenues from the sale of any approved product candidates.

 

Even following our establishment of our own cGMP-compliant manufacturing capabilities, we intend to continue to rely on third party suppliers for these raw materials, which will continue to expose us to manufacturing risks including:

 

	●	reduced control for certain aspects of manufacturing activities;
	●	termination or nonrenewal of manufacturing and service agreements with third parties in a manner or at a time that is costly or damaging to us; and
	●	disruptions to the operations of our third-party manufacturers and service providers caused by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or service provider.

 

 

Certain of our raw material suppliers will be required to become cGMP-compliant and establish a drug master file for the applicable ingredient before we can submit an NDA for our T&T platform product candidates. If these suppliers do not successfully carry out their contractual duties or manufacture our raw materials in accordance with regulatory requirements, we will not be able to submit our NDA as planned or complete, or may be delayed in completing, the clinical trials required for approval of our T&T platform product candidates. In such instances, we may need to locate an appropriate replacement third-party relationship, which may not be readily available or on acceptable terms, which would cause additional delay or increased expense prior to the approval of our C&C product candidates and would thereby have a material adverse effect on our business, financial condition, results of operations and prospects.

 

Additionally, we have not yet entered into binding agreements with certain third-party manufacturers to produce the raw materials and products that we use to manufacture our product candidates. Although we intend to rely on third-party manufacturers for the raw materials and products to support the manufacturing of our product candidates for commercialization, we have not yet entered into agreements with certain manufacturers. We may be unable to negotiate binding agreements with the manufacturers to support our commercialization activities at commercially reasonable terms.

 

Our reliance on third parties requires us to share our intellectual property, including trade secrets, which increases the possibility that a competitor will discover them or that our intellectual property will be misappropriated or disclosed.

 

Because we rely on third parties to provide us with the materials that we use to develop and, if appropriate in the future, manufacture our product candidates or approved product candidates, we may, at times, share trade secrets and intellectual property with such third parties. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements, or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets and intellectual property. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.

 

Despite our efforts to protect our trade secrets and knowhow, our competitors may discover our trade secrets, either through breach of these agreements, independent development or publication of information including our trade secrets by third parties. A competitor’s discovery of our trade secrets and knowhow would impair our competitive position and have an adverse impact on our business, financial condition, results of operations and prospects.

 

Risks Related to Our Intellectual Property

 

If we are unable to obtain and maintain effective patent rights for our product candidates or any future product candidates, we may not be able to compete effectively in our markets. If we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information may be used by others to compete against us.

 

We intend to rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies and product candidates. Our success depends in large part on our ability to obtain and maintain patent and other intellectual property protection in the United States and in other countries with respect to our proprietary technology and product candidates. This ability depends to a large extent on identifying aspects of the technology that are patentable, that their exposure via patent applications would not provide a third party of engineering around capabilities and on the ability to generate and identify superior data that would present a comparative edge vis-à-vis third party technologies.

 

 

We have sought to protect our proprietary position by filing patent applications in the United States, with respect to our novel technologies and product candidates, which are important to our business. These patent applications will base international and national patent filings in countries of interest to our business, such as the United States, the European Union and Israel. Patent prosecution is expensive and time consuming, and we may not be able to file and prosecute our applications in the United States, the European Union and Israel, at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.

 

As of February 3, 2023, our growing portfolio of patent applications consists of two families that disclose our technology. We cannot offer any assurances about which, if any, patents will issue in due time, the breadth of any such patent or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop. Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced.

 

Further, the patent position of medical device and pharmaceutical companies generally is highly uncertain and involves complex legal and factual questions for which legal principles remain unsolved. This renders the patent prosecution process particularly expensive and time-consuming. There is no assurance that all potentially relevant prior art relating to our patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even if such patents cover our product candidates, third parties may challenge their validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated. Furthermore, even if they are unchallenged, our patent applications and any future patents may not adequately protect our intellectual property, provide exclusivity for our product candidates, or prevent others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

 

If we cannot obtain and maintain effective patent rights for our product candidates, we may not be able to compete effectively, and our business and results of operations would be harmed.

 

We may not have sufficient patent lifespan to effectively protect our product candidates and business.

 

Patents have a limited lifespan. The natural expiration of a patent is generally 20 years counted from its filing date (or PCT filing date in case it is derived from an international application). Although various extensions may be available, they are uncommon and the protection they afford, is limited. Even if any of our patent applications matures into issued patents, if we do not have sufficient patent terms or regulatory exclusivity to protect our product candidates, our business and results of operations will be adversely affected.

 

Changes in patent policy and national intellectual property laws could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents.

 

Changes in patent laws or interpretation of patent laws in the United States and other countries may diminish the value of any patents that may issue from our patent applications, or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing. We therefore cannot be certain that we were the first to make the invention claimed in our owned patent or pending applications, or that we were the first to file for patent protection of such inventions.

 

 

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

 

Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition by potential partners or customers in our markets of interest. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. If other entities use trademarks similar to ours in different jurisdictions, or have senior rights to ours, it could interfere with our use of our current trademarks throughout the world.

 

If we are unable to maintain effective proprietary rights for our product candidates or any future product candidates, we may not be able to compete effectively in our markets.

 

In addition to the protection afforded by any patents that may be granted, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data, trade secrets and intellectual property by maintaining the physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets and intellectual property may otherwise become known or be independently discovered by competitors.

 

Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Misappropriation or unauthorized disclosure of our trade secrets and intellectual property could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets and intellectual property are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret.

 

Intellectual property rights of third parties could adversely affect our ability to commercialize our product candidates, and we might be required to litigate or obtain licenses from third parties in order to develop or market our product candidate. Such litigation or licenses could be costly or not available on commercially reasonable terms.

 

Our competitive position may suffer if patents issued to third parties or other third party intellectual property rights cover our product candidates or elements thereof, or our manufacturing or uses relevant to our development plans. In such cases, we may not be in a position to develop or commercialize our product candidates unless we successfully pursue litigation to nullify or invalidate the third party intellectual property right concerned, or enter into a license agreement with the intellectual property right holder, if available on commercially reasonable terms. There may also be pending patent applications that if they result in issued patents, could be alleged to be infringed by our product candidates. If such an infringement claim should be brought and be successful, we may be required to pay substantial damages, be forced to abandon our product candidates or seek a license from any patent holders. No assurances can be given that a license will be available on commercially reasonable terms, if at all.

 

 

It is also possible that we have failed to identify relevant third party patents or applications. Patent applications in the U.S. and elsewhere are published approximately 18 months after the earliest filing to which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our product candidates or technology could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, our product candidates or the use of our product candidates. Third party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays in pursuing the development of and/or marketing of our product candidates. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing our product candidates that are held to be infringing. We might, if possible, also be forced to redesign our product candidates so that we no longer infringe the third party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

 

Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.

 

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There have been many lawsuits and other proceedings involving patent and other intellectual property rights in the biotechnology, medical device and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and reexamination proceedings before the USPTO and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing product candidates. As the medical device and pharmaceutical industry expands and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.

 

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture, or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any materials formed during the manufacturing process or any final product candidates itself, the holders of any such patents may be able to block our ability to commercialize such product candidates unless we obtain a license under the applicable patents, or until such patents expire or are finally determined to be invalid or unenforceable.

 

Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture, or methods of use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtain a license or until such patent expires or is finally determined to be invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all.

 

 

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing product candidates or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.

 

We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses.

 

Because our technology may require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in-license, or use these proprietary rights. In addition, our product candidates may require specific formulations to work effectively and efficiently and the rights to these formulations may be held by others. We may be unable to acquire or in-license any compositions, methods of use, processes, or other third-party intellectual property rights from third parties that we identify as necessary for our product candidates. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources, and greater clinical development and commercialization capabilities.

 

For example, we sometimes collaborate with academic institutions to accelerate our preclinical research or development under written agreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program.

 

In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain rights to required third-party intellectual property rights, we may have to abandon development of that program and our business and financial condition could suffer.

 

We may be involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful.

 

Competitors may infringe our intellectual property or that of our licensors that we may acquire in the future. If we or a future licensing partner were to initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Under the AIA, the validity of U.S. patents may also be challenged in post-grant proceedings before the USPTO. The outcome following legal assertions of invalidity and unenforceability is unpredictable.

 

Interference proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patent or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring our product candidates to market.

 

 

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our Ordinary Shares.

 

We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

 

We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employees’ former employers or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

 

We may be subject to claims challenging the inventorship of our intellectual property.

 

We may be subject to claims that former employees, collaborators or other third parties have an interest in or right to compensation with respect to our patent applications, future patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to compensation. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. To the extent that our employees have not effectively waived the right to compensation with respect to inventions that they helped create, they may be able to assert claims for compensation with respect to our future revenue. As a result, we may receive less revenue from future product candidates if such claims are successful which in turn could impact our future profitability.

 

Changes in United States and international patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

 

Our success is heavily dependent on intellectual property. Obtaining and enforcing patents in the medical device and pharmaceutical industries involve both technological and legal complexity. Therefore, obtaining and enforcing these patents is costly, time consuming and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent United States Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on future actions by the United States Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain patents or to enforce patents that we might obtain in the future.

 

 

We may not be able to protect our intellectual property rights throughout the world.

 

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States may be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.

 

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also export otherwise infringing product candidates to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our product candidates. Future patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

 

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology productsor methods of treatment, which could make it difficult for us to stop the marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our future patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our future patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

 

Risks Related to Our Business Operations

 

Our business, operations and financial performance have been and may continue to be impacted by the COVID-19 pandemic.

 

The global spread of the COVID-19 pandemic and measures introduced by local, state and federal governments to contain the virus and mitigate its public health effects have significantly impacted the global economy. There remains considerable uncertainty around the duration and extent of the COVID-19 pandemic and its ongoing impacts, and we expect the evolving COVID-19 pandemic to continue to impact our business and these impacts may be substantial. In particular, the Company cannot accurately predict the future impact COVID-19 may have on, among others, (i) labor availability and supply lines, (iii) availability of essential supplies, or (iii) ability of the Company to obtain necessary financing. We may also experience limitations on employee resources in the future, including because of sickness of employees or their families. These factors may hamper the Company’s efforts to comply with filing or reporting obligations or requirements under securities laws.

 

The effects of government actions and our own policies and those of third parties to reduce the spread of COVID-19 have and may continue to negatively impact productivity, slow down our research and development activities, cause disruptions to our supply chain and impair our ability to execute our business development strategy. To the extent our suppliers and service providers are unable to comply with their obligations under our agreements with them or they are otherwise unable to deliver or are delayed in delivering goods and services to us due to the COVID-19 pandemic, our ability to continue meeting demand for or otherwise advancing development of our product candidates may be impaired.

 

While many jurisdictions have partially or entirely relaxed various “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions, some have not, such as those in much of Europe. Additionally, if there is a resurgence in infections in jurisdictions that have eased restrictions, then such restrictions may be reimplemented. Such orders or restrictions, as well as the perceived need by individuals to continue such practices to avoid infection, among other factors, continue to result in business closures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events, among other effects. The states and countries in which our product candidates and their components are manufactured, assembled, shipped and distributed are in varying stages of restrictions and re-opening to address the COVID-19 pandemic. Any existing or renewed quarantines, government actions related to the pandemic or shutdowns could disrupt our supply chain, manufacturing or shipping process, or sales channel.

 

The widespread pandemic has resulted, and may continue to result for an extended period, in significant disruption of global financial markets, reducing our ability to access capital, which would negatively affect our liquidity. In addition, if the COVID-19 pandemic results in a prolonged economic recession, it could harm our future sales, if any, and our ability to continue as a going concern. A prolonged economic contraction or recession may also result in employer layoffs in markets where we conduct business.

 

Despite global vaccination efforts, it is not possible to reliably estimate the length and severity of these developments and the impact the COVID-19 pandemic will continue to have on the financial results and condition of the Company in the future. To the extent the COVID-19 pandemic adversely affects our financial results and business, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

  

 

We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.

 

Our future financial performance and our ability to commercialize product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth. As our development and commercialization plans and strategies develop, we expect to need additional managerial, operational, sales, marketing, financial and legal personnel. Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenue could be reduced, and we may not be able to implement our business strategy.

 

Due to our limited resources and access to capital, we must, and have in the past decided to, prioritize development of certain product candidates over other potential candidates. These decisions may prove to have been wrong and may adversely affect our revenues.

 

Because we have limited resources and access to capital to fund our operations, we must decide which product candidates to pursue and the amount of resources to allocate to each. Our decisions concerning the allocation of research, collaboration, management and financial resources toward particular product candidates may not lead to the development of viable commercial product candidates and may divert resources away from better opportunities. Similarly, our decisions to delay, terminate or collaborate with third parties in respect of certain product candidates development programs may also prove not to be optimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the market potential of our product candidates or misread trends in the medical device and pharmaceutical industries, in particular for our lead product candidate, our business, financial condition and results of operations could be materially adversely affected.

 

We may not be successful in our efforts to identify, discover or license additional product candidates.

 

Although a substantial amount of our effort will focus on the continued clinical testing, potential approval and commercialization of our product candidates, the success of our business also depends upon our ability to identify, discover or license additional product candidates. Our research programs or licensing efforts may fail to yield additional product candidates for clinical development for a number of reasons, including: lack of financial or personnel resources to acquire or discover additional product candidates; new product candidates may not succeed in preclinical or clinical testing, or may be shown to have harmful side effects or may have other characteristics that may make them unmarketable or unlikely to receive marketing approval; our competitors may develop alternatives that render our product candidates obsolete or less attractive; the market for a product candidate may change during our development program so that such product candidates may become unprofitable to continue to develop; new product candidates may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and new product candidates may not be accepted as safe and effective by patients, the medical community, or third-party payors.

 

 

We may be forced to abandon our development efforts for a program or programs that are unsuccessful, or we may not be able to identify, license, or discover additional product candidates, which would have a material adverse effect on our business and could potentially cause us to cease operations. Further, research programs to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.

 

European data collection is governed by restrictive regulations governing the collection, use, processing and cross-border transfer of personal information.

 

We may collect, process, use or transfer personal information from individuals located in the European Union in connection with our business, including in connection with conducting clinical trials in the European Union. Additionally, we intend to commercialize our product candidates, and any of our product candidates that receive marketing approval, in the European Union. The collection and use of personal health data in the European Union is governed by the provisions of the General Data Protection Regulation ((EU) 2016/679), or the GDPR, along with other European Union and country-specific laws and regulations. The United Kingdom and Switzerland have also adopted data protection laws and regulations. These legislative acts (together with regulations and guidelines) impose requirements relating to having legal bases for processing personal information relating to identifiable individuals and transferring such information outside of the EEA, including to the United States, providing details to those individuals regarding the processing of their personal information, keeping personal information secure, having data processing agreements with third parties who process personal information, responding to individuals’ requests to exercise their rights in respect of their personal information, reporting security breaches involving personal data to the competent national data protection authority and affected individuals, appointing data protection officers, conducting data protection impact assessments and record-keeping. The GDPR imposes additional responsibilities and liabilities in relation to personal data that we process and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. Failure to comply with the requirements of the GDPR and related national data protection laws of the member states of the European Union may result in substantial fines, other administrative penalties and civil claims being brought against us, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

 

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

 

Our research, development and manufacturing activities and our third party manufacturers’ and suppliers’ activities involve the controlled storage, use and disposal of hazardous materials, including the components of our product candidates and other hazardous compounds. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. In some cases, these hazardous materials and various wastes resulting from their use are stored at our and our manufacturers’ facilities pending their use and disposal. We cannot eliminate the risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts and business operations, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste product candidates. Although we believe that the safety procedures utilized by our third-party manufacturers for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages, such liability could exceed our resources, and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. We do not currently carry biological or hazardous waste insurance coverage.

 

 

Our employees and independent contractors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

 

We are exposed to the risk of fraud or other misconduct by our employees and independent contractors. Misconduct by these parties could include intentional failures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards we may establish, comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee and independent contractor misconduct could also involve the improper use of information obtained in the course of clinical trials, including individually identifiable information, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of product candidates, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

 

Under applicable employment laws, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.

 

We generally enter into non-competition agreements with our employees and certain key consultants. These agreements prohibit our employees and certain key consultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefitting from the expertise our former employees or consultants developed while working for us.

 

For example, Israeli courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of its intellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our ability to remain competitive may be diminished.

 

International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States or Israel.

 

Other than our headquarters and other operations which are located in Israel (as further described below), we currently have limited international operations, but our business strategy incorporates potentially significant international expansion, particularly in anticipation of approval of our product candidates. We plan to retain sales representatives and third party distributors and conduct physician, ENT specialist, hospital pharmacist and patient association outreach activities, as well as clinical trials, outside of the United States, European Union and Israel. Doing business internationally involves a number of risks, including but not limited to:

 

●

multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits, and licenses;

 

●

failure by us to obtain regulatory approvals for the use of our product candidates in various countries;

 

 

	●	additional potentially relevant third-party patent rights;
	●	complexities and difficulties in obtaining protection and enforcing our intellectual property;
	●	difficulties in staffing and managing foreign operations;
	●	complexities associated with managing multiple payor reimbursement regimes, government payors, prince controls or patient self-pay systems;
	●	limits in our ability to penetrate international markets;
	●	financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our product candidates and exposure to foreign currency exchange rate fluctuations;
	●	an outbreak of a contagious disease, including COVID-19, which may cause us or our distributors, third party vendors and manufacturers and/or customers to temporarily suspend our or their respective operations in the affected city or country;
	●	natural disasters, political and economic instability, including wars, terrorism, and political unrest, boycotts, curtailment of trade, and other business restrictions;
	●	certain expenses including, among others, expenses for travel, translation and insurance; and
	●	regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act its books and records provisions, or its anti-bribery provisions.

 

Any of these factors could significantly harm our future international expansion and operations and, consequently, our results of operations.

 

Risks Related to Commercialization of Our Product Candidates

 

We currently have no marketing and sales organization. If we are unable to establish marketing and sales capabilities, or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any product candidates revenue.

 

We have no experience selling and marketing our product candidates, and we currently have no marketing or sales organization. To successfully commercialize any product candidates that may result from our development programs, we will need to develop these capabilities, either on our own or with others. If our product candidates receive regulatory approval, we intend to establish a sales and marketing organization independently or by utilizing experienced third parties with technical expertise and supporting distribution capabilities to commercialize our product candidates in major markets, all of which will be expensive, difficult and time consuming. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact our ability to commercialize our product candidates.

 

Further, given our lack of prior experience in marketing and selling medical device and pharmaceutical products, our initial estimate of the size of the required sales force may be materially more or less than the size of the sales force actually required to effectively commercialize our product candidates. As such, we may be required to hire sales representatives and third party distributors to adequately support the commercialization of our product candidates, or we may incur excess costs if we hire more sales representatives than necessary. With respect to certain geographical markets, we may enter into collaborations with other entities to utilize their local marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all. We also may enter into collaborations with large medical device and pharmaceutical companies to develop and commercialize product candidates. If our future collaborators do not commit sufficient resources to develop and commercialize our future product candidates, if any, and we are unable to develop the necessary marketing capabilities on our own, we will be unable to generate sufficient product candidates revenue to sustain our business. We may compete with companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

 

 

Our efforts to educate the medical community, including physicians, hospital pharmacists and third-party payors on the benefits of our product candidates may require significant resources and may never be successful. If any of our product candidates are approved but fail to achieve market acceptance among physicians, patients or third-party payors, we will not be able to generate significant revenues from such product candidates, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

 

We are subject to significant regulatory oversight with respect to manufacturing our product candidates. Delays in establishing and obtaining regulatory approval of our manufacturing process may delay or disrupt our product candidates development and commercialization efforts.

 

The preparation of drug products for clinical trials or commercial sale is subject to extensive regulation. Before we can begin to commercially manufacture our product candidates or any product candidate, we must obtain regulatory approvals from the Israeli Ministry of Health, or MOH, the FDA and similar regulatory agencies, as applicable for our manufacturing process and facility. A manufacturing authorization must also be obtained from the appropriate regulatory authorities in the European Union and worldwide. In addition, we must pass a pre-approval inspection of our manufacturing facility by the FDA before our C&C product candidates or any product candidate can obtain marketing approval. In order to obtain approval, we will need to ensure that all of our processes, methods and equipment are compliant with cGMP, and perform extensive audits of vendors, contract laboratories and suppliers. If any of our vendors, contract laboratories or suppliers is found to be out of compliance with cGMP, we may experience delays or disruptions in manufacturing while we work with these third parties to remedy the violation or while we work to identify suitable replacement vendors. For example, in the past, a cGMP audit by the MOH of the manufacturing process in the facility of our contract manufacturer for our C&C product candidates resulted in certain critical observations, which have since been resolved. There can be no guarantee, however, that future inspections by regulatory authorities of our manufacturing facilities or those of our contract manufacturers will result in MOH’s agreement that these critical observations have been resolved or that similar inspectional observations will not be identified. If we do not demonstrate to the satisfaction of the applicable regulator that our manufacturing facilities, or those of our contract manufacturers, are in compliance with applicable requirements, we may be materially delayed in the development of our product candidates, which would materially harm our business. The cGMP requirements govern quality control of the manufacturing process and documentation policies and procedures. In complying with cGMP, we will be obligated to expend time, money and effort in production, record keeping and quality control to assure that the product candidates meets applicable specifications and other requirements. If we fail to comply with these requirements, we would be subject to possible regulatory action and may not be permitted to sell any product candidate that we may develop.

 

Our failure to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products or product candidates, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of any approved products and our product candidates.

 

If we receive marketing approval for our product candidates, sales will be limited unless the product candidates achieves broad market acceptance by physicians, patients, third-party payors, hospital pharmacists, infectious disease specialists and others in the medical community.

 

The commercial success of our product candidates will depend upon the acceptance of the product candidates by the medical community, including physicians, patients, healthcare payors, hospital pharmacists and infectious disease specialists. The degree of market acceptance of any approved product candidates will depend on a number of factors, including:

 

●

the demonstration of clinical safety and efficacy of our product candidates in clinical trials;

 

●

the efficacy, potential and perceived advantages of our product candidates over alternative treatments;

 

 

	●	the cost of treatment relative to alternative treatments;
	●	the prevalence and severity of any adverse side effects;
	●	product candidates labeling or product candidates insert requirements of the FDA or other regulatory authorities, including any limitations or warnings contained in a product candidate’s approved labeling;
	●	distribution and use restrictions imposed by the FDA or agreed to by us as part of a mandatory or voluntary risk management plan;
	●	our ability to obtain third-party coverage and adequate reimbursement;
	●	the willingness of patients to pay for drugs out of pocket in the absence of third-party coverage;
	●	the demonstration of the effectiveness of our product candidates in reducing the cost of treatment;
	●	the strength of marketing and distribution support;
	●	the timing of market introduction of competitive products;
	●	the availability of product candidates and their ability to meet market demand; and
	●	publicity concerning our product candidates or competing products and treatments.

 

If our product candidates are approved but do not achieve an adequate level of acceptance by physicians, patients, healthcare payors, hospital pharmacists and infectious disease specialists, we may not generate sufficient revenue from the product candidates, and we may not become or remain profitable. In addition, our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful.

 

It may be difficult for us to profitably sell our product candidates if coverage and reimbursement for these product candidates, or the procedures in which they are used, is limited by government authorities and/or third-party payor policies.

 

In addition to any healthcare reform measures which may affect reimbursement, market acceptance and sales of our product candidates, if approved, will depend on, in part, the extent to which the procedures utilizing our product candidates, performed by health care providers, will be covered by third party payors, such as government health care programs, commercial insurance and managed care organizations. Our product candidates will be purchased or provided by health care providers for utilization in certain surgical procedures. In the event health care providers and patients accept our product candidates as medically useful, cost effective and safe, there is uncertainty regarding whether our product candidates will be directly reimbursed, reimbursed through a bundled payment or if the product candidates will be included in another type of value-based reimbursement program. Third party payors determine the extent to which new product candidates or procedures will be covered as a benefit under their plans and the level of reimbursement for any covered product candidates or procedure which may utilize a covered product candidates.

 

When used in connection with certain procedures, our product candidates may not be reimbursed separately but their cost may instead be bundled as part of the payment received by the provider for the procedure only. Treating physicians are unlikely to use and order our product candidates unless coverage is provided and the reimbursement is adequate to cover all or a significant portion of the cost of the procedures which utilize our product candidates. A decision by a third-party payor not to cover or adequately reimburse for our product candidates or procedures using our product candidates, could reduce physician utilization of our product candidates once approved. Therefore, coverage and adequate reimbursement for procedures which utilize new product candidates is critical to the acceptance of such new product candidates.

 

A primary trend in the U.S. healthcare industry and elsewhere has been cost containment, including price controls, restrictions on coverage and reimbursement and requirements for substitution of less expensive products and procedures. Third party payors decide which products and procedures they will pay for and establish reimbursement and co-payment levels. Government and other third-party payors are increasingly challenging the prices charged for healthcare products and procedures, examining the cost effectiveness of procedures, and the products used in such procedures, in addition to their safety and efficacy, and limiting or attempting to limit both coverage and the level of reimbursement. We cannot be sure that coverage will be available for our product candidates, if approved, or, if coverage is available, the level of direct or indirect reimbursement.

 

 

We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the successful commercialization of new product candidates. Further, the adoption and implementation of any future governmental cost containment or other health reform initiative may result in additional downward pressure on the price that we may receive for any approved product candidates.

 

Reimbursement by a third-party payor may depend upon a number of factors including the third-party payor’s determination that use of a product candidates is:

 

	●	a covered benefit or part of a covered benefit under its health plan;
	●	safe, effective and medically necessary;
	●	appropriate for the specific patient;
	●	cost-effective; and
	●	neither experimental nor investigational.

 

In the United States, third-party payors, including private and governmental payors such as the Medicare and Medicaid programs, play an important role in determining the extent to which procedures using new product candidates will be covered and reimbursed. The Medicare and Medicaid programs are increasingly used as models for how private payors and other governmental payors develop their coverage and reimbursement policies. It is difficult to predict at this time what third-party payors will decide with respect to reimbursement for fundamentally novel product candidates such as ours, as there is no body of established practices and precedents for these new product candidates.

 

Obtaining coverage and reimbursement approval for a products from a government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost effectiveness data for the use of our product candidates to the payor.

 

Additionally, we may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for our product candidates, if approved. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our future product candidates. If reimbursement is not available, or is available only to limited levels, we may not be able to commercialize our product candidates, or achieve profitably at all, even if approved.

 

Our business entails a significant risk of clinical trial and/or product candidates liability and our ability to obtain sufficient insurance coverage could have a material effect on our business, financial condition, results of operations or prospects.

 

Our business exposes us to significant clinical trial and/or product candidates liability risks inherent in the development, testing, manufacturing and marketing of therapeutic treatments. Clinical trial and/or product candidates liability claims could delay or prevent completion of our development programs. If we succeed in marketing product candidates, product candidates liability claims could result in an FDA investigation of the safety and effectiveness of our product candidates, our manufacturing processes and facilities or our marketing programs and potentially a recall of our product candidates or more serious enforcement action, limitations on the approved indications for which they may be used or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our product candidates, injury to our reputation, costs to defend the related litigation, a diversion of management’s time and our resources, substantial monetary awards to trial participants or patients and a decline in our company valuation. While we currently have clinical trial liability insurance, we do not have product candidates liability insurance and do not anticipate obtaining product candidates liability insurance until such time as we have received FDA or other comparable foreign authority approval for a product candidates and there is a product candidates that is being provided to patients outside of clinical trials. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. In some countries, the institution or the doctors involved do not have sufficient insurance to cover their activities. Furthermore, clinical trial and product candidates liability insurance are becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by clinical trial and product candidates liability claims that could have a material adverse effect on our business.

 

 

Risks Related to this Offering and Ownership of Our Securities

 

The market price of our securities may be highly volatile, and you may not be able to resell your Ordinary Shares or Warrants at or above the initial public offering price.

 

Prior to this offering, there has not been a public market for our securities. Although we have applied to list our Ordinary Shares and Warrants on Nasdaq, an active trading market for the Ordinary Shares or Warrants may not develop or be sustained. If an active trading market for our Ordinary Shares or Warrants does not develop following this offering, you may not be able to sell your Ordinary Shares or Warrants quickly or at the market price. The initial public offering price for the Units will be determined by negotiations between us and the underwriter and may not be indicative of prices that will prevail in the trading market.

 

The trading price of each of our Ordinary Shares and Warrants is likely to be volatile. The following factors, in addition to other risk factors described in this section, may have a significant impact on the market price of such securities:

 

	●	inability to obtain the approvals necessary to commence clinical trials;
	●	unsatisfactory results of clinical trials;
	●	announcements of regulatory approval or the failure to obtain it, or specific label indications or patient populations for its use, or changes or delays in the regulatory review process;
	●	announcements of innovations or new product candidates by us or our competitors;
	●	adverse actions taken by regulatory authorities with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;
	●	any adverse changes to our relationship with manufacturers or suppliers;
	●	any intellectual property infringement actions in which we may become involved;
	●	achievement of expected product candidates sales and profitability or our failure to meet expectations;
	●	our commencement of, or involvement in, litigation;
	●	any major changes in our board of directors or management;
	●	our ability to recruit and retain qualified regulatory, research and development personnel;
	●	legislation in the United States relating to the sale or pricing of medical devices;
	●	the depth of the trading market in our securities;

 

 

	●	termination of the lock-up agreements or other restrictions limiting our ability or that of any of our existing shareholders to sell our Ordinary Shares (or any other securities that we may issue, if any) after this offering;
	●	economic weakness, including inflation, or political instability in particular foreign economies and markets;
	●	business interruptions resulting from a local or worldwide pandemic, such as COVID-19, geopolitical actions, including war and terrorism, or natural disasters;
	●	the granting or exercise of employee stock options or other equity awards; and
	●	changes in investors’ and securities analysts’ perception of the business risks and conditions of our business.

 

In addition, the stock market in general, and the Nasdaq in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of small companies. Broad market and industry factors may negatively affect the market price of our securities, regardless of our actual operating performance. Further, a systemic decline in the financial markets and related factors beyond our control may cause our share price to decline rapidly and unexpectedly.

 

The Warrants are speculative in nature.

 

Except as otherwise set forth therein, the Warrants offered in this offering do not confer any rights of Ordinary Share ownership on their holders, such as voting rights, but rather merely represent the right to acquire Ordinary Shares at a fixed price for a limited period of time. Specifically, commencing on the date of issuance, holders of the Warrants may exercise their right to acquire Ordinary Shares and pay an exercise price of $5.825 (based on an assumed public offering price of $6.20 per Unit, the midpoint of the price range of the Units) per Ordinary Share (with such exercise price equal to the public offering price per Unit less $0.125 per Warrant included in the Unit), prior to five years from the date of issuance, after which date any unexercised Warrants will expire and have no further value. There can be no assurance that the market price of our Ordinary Shares will continue to equal or exceed the exercise price of the Warrants offered by this prospectus. In the event that our Ordinary Shares price does not exceed the exercise price of such Warrants during the period when such Warrants are exercisable, the Warrants may not have any value.

 

There is no directly governing authority addressing the tax treatment of Pre-Funded Warrants.

 

There is no directly governing authority addressing the tax treatment of the Pre-Funded Warrants, and it is possible that the IRS may not treat the Pre-Funded Warrants the same as Ordinary Shares for U.S. federal income tax purposes, and may instead treat them as warrants to acquire Ordinary Shares. In the event the IRS treats our Pre-Funded Warrants as warrants instead of ordinary shares, the tax consequences, including the amount and character of your gain, with respect to an investment in our Pre-Funded Warrants could change.

 

There is no established market for the Warrants or Pre-Funded Warrants being offered in this offering.

 

There is no established trading market for the Warrants or Pre-Funded Warrants offered in this offering. We do not intend to apply to list the Pre-Funded Warrants on any securities exchange or other nationally recognized trading system. Although we have applied to list the Warrants on Nasdaq there can be no assurance that there will be an active trading market for the Warrants. Without an active trading market, the liquidity of the Warrants will be limited.

 

Future sales of our Ordinary Shares could reduce the market price of our Ordinary Shares. 

 

Substantial sales of our Ordinary Shares on Nasdaq, including following this offering, may cause the market price of our Ordinary Shares to decline. Sales by us or our security holders of substantial amounts of our Ordinary Shares, or the perception that these sales may occur in the future, could cause a reduction in the market price of our Ordinary Shares.

 

The issuance of any additional Ordinary Shares or any securities that are exercisable for or convertible into Ordinary Shares, may have an adverse effect on the market price of our Ordinary Shares and will have a dilutive effect on our existing shareholders and holders of Ordinary Shares. 

 

Our executive officers, directors and principal shareholders will maintain the ability to exert significant control over matters submitted to our shareholders for approval.

 

As of February 3, 2023, our executive officers, directors and principal shareholders who own more than 5% of our outstanding Ordinary Shares, in the aggregate, beneficially own shares representing approximately 72% of our share capital. As a result, if these shareholders were to act together, they would be able to exert significant influence over all matters submitted to our shareholders for approval (including a prospective acquisition or other change of control of our company), as well as our management and affairs.

 

 

Our Selling Shareholders have purchased their shares at a price that is lower than the purchase price of the shares in this offering and will be able to sell their shares after completion of this offering subject to restrictions under the lock-up requirement.

 

Our Selling Shareholders have purchased their Ordinary Shares at an average price of approximately $0.74 per share, which is substantially lower than the initial public offering price of $6.20 per Unit, which is the midpoint of the price range set forth on the cover page of this prospectus. The Ordinary Shares issued to the Selling Shareholders are “restricted” securities under applicable U.S. federal and state securities laws and are being registered to provide the Selling Shareholders the opportunity to sell those Ordinary Shares. Because these shareholders have paid a lower price per Ordinary Share than participants in this offering, they may be more willing to accept a lower sales price than the IPO price. This fact could impact the trading price of the Ordinary Shares following completion of the offering to the detriment of participants in this offering. Other than certain affiliates holding Ordinary Shares, the remaining Selling Shareholders are not subject to any lock-up or leakage agreements and have the right to sell the shares being registered hereby at any time. See “Shares Eligible for Future Sale—Eligibility of Restricted Shares for Sale in the Public Market” for additional information.

 

Management will have broad discretion as to the use of the proceeds from this offering.

 

Our management will have broad discretion in the allocation of the net proceeds and could use them for purposes other than those contemplated at the time of this offering and as described in the section titled “Use of Proceeds.” Our shareholders may not agree with the manner in which our management chooses to allocate and spend the net proceeds.

 

U.S. shareholders may suffer adverse tax consequences if we are characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. 

 

Based on the projected composition of our income and valuation of our assets, we do not believe that we were a PFIC for 2022, and do not expect to be a PFIC for 2023, and we do not expect to become a PFIC in the future. The determination of whether we are a PFIC is made on an annual basis and will depend on the composition of our income and assets from time to time. We will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (1) at least 75% of our gross income is “passive income” or (2) on quarterly average at least 50% of our assets by value produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account. The tests for determining PFIC status are applied annually and it is difficult to make accurate projections of future income and assets which are relevant to this determination. In addition, our PFIC status may depend in part on the market value of our Equity Securities. Accordingly, there can be no assurance that we currently are not or will not become a PFIC in the future. If we are a PFIC in any taxable year during which a U.S. taxpayer holds our Equity Securities (including Warrants, which are treated as PFIC stock), such U.S. taxpayer would be subject to certain adverse U.S. federal income tax rules. In particular, if the U.S. taxpayer did not make an election to treat us as a “qualified electing fund”, or QEF, or make a “mark-to-market” election, then “excess distributions” to the U.S. taxpayer, and any gain realized on the sale or other disposition of our Equity Securities by the U.S. taxpayer: (1) would be allocated ratably over the U.S. taxpayer’s holding period for our Equity Securities; (2) the amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, if the U.S. Internal Revenue Service, or the IRS, determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, it may be too late for a U.S. taxpayer to make a timely QEF or mark-to-market election. U.S. taxpayers that have held our Equity Securities during a period when we were a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC in subsequent years, subject to exceptions for U.S. taxpayer who made a timely QEF or mark-to-market election. A U.S. taxpayer can make a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. We do not intend to notify U.S. taxpayers that hold our Equity Securities if we believe we will be treated as a PFIC for any taxable year in order to enable U.S. taxpayers to consider whether to make a QEF election. In addition, we do not intend to furnish such U.S. taxpayers annually with information needed in order to complete IRS Form 8621 and to make and maintain a valid QEF election for any year in which we are a PFIC. A QEF election and a “mark-to-market” election will each be unavailable with respect to our Warrants. See “Taxation—U.S. Federal Income Tax Considerations—Passive Foreign Investment Companies” for additional information.

 

If a United States person is treated as owning at least 10% of our shares, such holder may be subject to adverse U.S. federal income tax consequences.

 

If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our shares, such person may be treated as a “United States shareholder” with respect to each “controlled foreign corporation” in our Company (if any). A United States shareholder of a controlled foreign corporation may be required to annually report and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income” and investments in U.S. property by controlled foreign corporations, whether or not we make any distributions. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. A failure to comply with these reporting obligations may subject you to significant monetary penalties and may prevent the statute of limitations with respect to your U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining whether such investors are treated as a United States shareholder with respect to any of such controlled foreign corporations or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. A United States investor should consult their own advisors regarding the potential application of these rules to its investment in the shares.

 

 

As a foreign private issuer, we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicable Nasdaq requirements, and we will not be subject to certain U.S. securities laws including, but not limited to, U.S. proxy rules and the filing of certain Exchange Act reports.

 

As a foreign private issuer, we will be permitted, and intend, to follow certain home country corporate governance practices instead of those otherwise required by the Nasdaq Stock Market for domestic U.S. issuers. Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on The Nasdaq Global Market may provide less protection to you than what is accorded to investors under the listing rules of Nasdaq applicable to domestic U.S. issuers.

 

As a foreign private issuer, we will be exempt from the rules and regulations under the Securities Exchange Act of 1934, or the Exchange Act, related to the furnishing and content of proxy statements, including the applicable compensation disclosure requirements. Nevertheless, pursuant to regulations promulgated under the Israeli Companies Law, 5759-1999, or the Israeli Companies Law, we are required to disclose the annual compensation of our five most highly compensated office holders on an individual basis. Such disclosure will not be as extensive as that required of a U.S. domestic issuer. Our officers, directors and principal shareholders will also be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act and we will be exempt from filing quarterly reports with the SEC under the Exchange Act. Moreover, we will not be required to comply with Regulation FD, which restricts the selective disclosure of material information, although we intend to voluntarily adopt a corporate disclosure policy substantially similar to Regulation FD. These exemptions and leniencies will reduce the frequency and scope of information and protections to which you may otherwise have been eligible in relation to a U.S. domestic issuer.

 

We would lose our foreign private issuer status if a majority of our shares are owned by U.S. residents and a majority of our directors or executive officers are U.S. citizens or residents or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We may also be required to modify certain of our policies to comply with accepted governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, we would lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.

 

 

We are an emerging growth company and the reduced disclosure requirements applicable to emerging growth companies may make our Ordinary Shares less attractive to investors.

 

We are an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirements that are applicable to other public companies that are not emerging growth companies.

 

For as long as we remain an emerging growth company we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not “emerging growth companies.” These exemptions include:

 

	●	not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
	●	Section 107 of the JOBS Act, which provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. This means that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to delay such adoption of new or revised accounting standards. As a result of this adoption, our financial statements may not be comparable to companies that comply with the public company effective date;
	●	not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
	●	reduced disclosure obligations regarding executive compensation; and
	●	exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

 

We will remain an emerging growth company until the earliest of: (i) the last day of our fiscal year during which we have total annual gross revenues of at least $1.07 billion; (ii) December 31, 2025; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act. We have opted out of the extended transition period made available to emerging growth companies to comply with newly adopted public company accounting requirements.

 

When we are no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above. We cannot predict if investors will find our Ordinary Shares less attractive as a result of our reliance on exemptions under the JOBS Act. If some investors find our Ordinary Shares less attractive as a result, there may be a less active trading market for our Ordinary Shares and our share price may be more volatile.

 

If you purchase securities in this offering, you will incur immediate and substantial dilution in the book value of your shares.

 

The offering price of the Ordinary Shares is substantially higher than the net tangible book value per share of our Ordinary Shares. Therefore, if you purchase securities in this offering, you will pay a price per Ordinary Share that substantially exceeds our net tangible book value per Ordinary Share after this offering. To the extent outstanding options or warrants are exercised, you will incur further dilution. Based on an assumed public offering price of $6.20 per Unit, which is the midpoint of the price range set forth on the cover page of this prospectus, you will experience immediate dilution of $3.64 per Ordinary Share, representing the difference between our pro forma net tangible book value per Ordinary Share after giving effect to this offering and the offering price. See “Dilution” for further information.

 

Certain recent initial public offerings of companies with public floats comparable to the anticipated public float of Polyrizon have experienced extreme volatility that was seemingly unrelated to the underlying performance of the respective company.

 

Our Ordinary Shares may be subject to extreme volatility that is seemingly unrelated to the underlying performance of our business. Recently, companies with comparable anticipated public floats and initial public offering sizes have experienced instances of extreme stock price run-ups followed by rapid price declines, and such stock price volatility was seemingly unrelated to the respective company’s underlying performance. Although the specific cause of such volatility is unclear, our anticipated public float may amplify the impact of the actions taken by a few shareholders on the price of our Ordinary Shares, which may cause our share price to deviate, potentially significantly, from a price that better reflects the underlying performance of our business. Should our Ordinary Shares experience run-ups and declines that are seemingly unrelated to our actual or expected operating performance and financial condition or prospects, prospective investors may have difficulty assessing the rapidly changing value of our Ordinary Shares. In addition, investors of shares of our Ordinary Shares may experience losses, which may be material, if the price of our Ordinary Shares declines after this offering or if such investors purchase shares of our Ordinary Shares prior to any price decline.

 

 

Risks Related to Israeli Law and Our Operations in Israel

 

Our headquarters and other significant operations are located in Israel, and, therefore, our results may be adversely affected by political, economic and military instability in Israel.

 

Our executive offices, research and development laboratories are located in Ra’anana, Israel. In addition, the majority of our key employees, officers and directors are residents of Israel. If these or any future facilities in Israel were to be damaged, destroyed or otherwise unable to operate, whether due to war, acts of hostility, earthquakes, fire, floods, hurricanes, storms, tornadoes, other natural disasters, employee malfeasance, terrorist acts, power outages or otherwise, or if performance of our research and development is disrupted for any other reason, such an event could delay our clinical trials or, if our product candidates are approved and we choose to manufacture all or any part of them internally, jeopardize our ability to manufacture our product candidates as promptly as our prospective customers will likely expect, or possibly at all. If we experience delays in achieving our development objectives, or if we are unable to manufacture an approved product candidates within a timeframe that meets our prospective customers’ expectations, our business, prospects, financial results and reputation could be harmed.

 

Political, economic and military conditions in Israel may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and groups in its neighboring countries. In addition, several countries, principally in the Middle East, restrict doing business with Israel, and additional countries may impose restrictions on doing business with Israel and Israeli companies whether as a result of hostilities in the region or otherwise. Any hostilities involving Israel, terrorist activities, political instability or violence in the region or the interruption or curtailment of trade or transport between Israel and its trading partners could adversely affect our operations and results of operations and the market price of our Ordinary Shares.

 

Our commercial insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East. Although the Israeli government is currently committed to covering the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our business, financial condition and results of operations.

 

Further, our operations could be disrupted by the obligations of our employees to perform military service. Currently, the three full-time employees and one part-time contractor of the Company are not required to perform reserve military service. However, any future employee and/or contractor of the Company which will reside in Israel may be required to perform reserve militarily reservists, and may be called upon to perform military reserve duty of up to 36 days per year (and in some cases more) until they reach the age of 40 (and in some cases, up to the age of 45 or older). Additionally, they may be called to active duty at any time under emergency circumstances. In response to increased tension and hostilities in the region, there were, at times, call-ups of military reservists, and it is possible that there will be additional call-ups in the future. Our operations could be disrupted by the absence of these employees and/or any future Israeli contractors due to military service. Such disruption could occur and, therefore, harm our business and operating results.

 

Our operations are subject to currency and interest rate fluctuations.

 

Although our functional currency is the U.S. dollar, and our financial records are maintained in U.S. dollars, we also incur expenses in Euros and New Israeli Shekels. In the future, we expect that a substantial portion of our revenues will be generated in U.S. dollars, Euros and other foreign currencies, although we currently incur a significant portion of our expenses in currencies other than U.S. dollars, mainly New Israeli Shekels. As a result, we are affected by foreign currency exchange fluctuations through both translation risk and transaction risk, and our financial results may be affected by fluctuations in the exchange rates of currencies in the countries in which our prospective product candidates may be sold.

 

 

We received Israeli government grants for certain of our research and development activities, the terms of which may require us to pay royalties and to satisfy specified conditions in order to manufacture product candidates and transfer technologies outside of Israel. If we fail to satisfy these conditions, we may be required to pay penalties and refund grants previously received.

 

Our research and development efforts have been financed in part through royalty-bearing grants in an aggregate amount of $620,000 that we received from the IIA during 2007-2010. The last IIA-approved research and development grants ended on December 31, 2018. With respect to the royalty-bearing grants we are committed to pay royalties at a rate between 3% and 4.5% on sales proceeds from our product candidates that were developed under IIA programs up to the total amount of grants received, linked to the U.S. dollar and bearing interest at an annual rate of LIBOR applicable to U.S. dollar deposits. As of February 3, 2023, our contingent liabilities regarding IIA grants received by us were in an aggregate amount of $744,000 (including accumulated interest). We are further required to comply with the requirements of the Israeli Encouragement of Industrial Research, Development and Technological Innovation Law, 5744-1984, as amended, and related regulations, or the Research Law, with respect to those past grants. When a company develops know-how, technology or product candidates using IIA grants, the terms of these grants and the Research Law restrict the transfer or license of such know-how, and the transfer of manufacturing or manufacturing rights of such product candidates, technologies or know-how outside of Israel, without the prior approval of the IIA. Therefore, the discretionary approval of an IIA committee would be required for any transfer or license to third parties inside or outside of Israel of know how or for the transfer outside of Israel of manufacturing or manufacturing rights related to those aspects of such technologies. We may not receive those approvals. Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to transfer technology or development.

 

The transfer or license of IIA-supported technology or know-how outside of Israel and the transfer of manufacturing of IIA-supported product candidates, technology or know-how outside of Israel may involve the payment of significant amounts, depending upon the value of the transferred or licensed technology or know-how, our research and development expenses, the amount of IIA support, the time of completion of the IIA-supported research project and other factors. These restrictions and requirements for payment may impair our ability to sell, license or otherwise transfer our technology assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product candidates or technology outside of Israel. It should be noted that an event of change of control may be considered a transfer of our technology or assets and therefore require the prior approval of the IIA before completing such a transaction. The IIA may also require potential acquirers to execute undertakings to procure our continued adherence to the terms of the IIA grants and/or impose other restrictions on such transactions. Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel of technology or know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA.

 

Provisions of Israeli law and our amended and restated articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, us, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.

 

Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date on which a merger proposal is filed by each merging company with the Israel Registrar of Companies and at least 30 days have passed from the date on which the shareholders of both merging companies have approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, a tender offer for all of a company’s issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital. Completion of the tender offer also requires approval of a majority of the offerees that do not have a personal interest in the tender offer, unless, following consummation of the tender offer, the acquirer would hold at least 98% of the Company’s outstanding shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, claim that the consideration for the acquisition of the shares does not reflect their fair market value, and petition an Israeli court to alter the consideration for the acquisition accordingly, unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek such appraisal rights, and the acquirer or the company published all required information with respect to the tender offer prior to the tender offer’s response date.

 

 

Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of a number of conditions, including, in some cases, a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating companies are subject to certain restrictions. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred. These provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition or merger would be beneficial to us or to our shareholders.

 

It may be difficult to enforce a judgment of a U.S. court against us and our executive officers and directors in Israel or the United States, to assert U.S. securities laws claims in Israel or to serve process on our executive officers and directors and these experts.

 

We were incorporated in Israel. Substantially all of our executive officers and directors reside outside of the United States, and all of our assets and most of the assets of these persons are located outside of the United States. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court.

 

Our amended and restated articles of association to be effective upon the closing this offering will provide that unless the Company consents otherwise, the competent courts of Tel Aviv, Israel shall be the sole and exclusive forum for substantially all disputes between the Company and its shareholders under the Companies Law and the Israeli Securities Law.

 

The competent courts of Tel Aviv, Israel shall be the exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Companies Law or the Israeli Securities Law, 5728-1968 (the “Israeli Securities Law”). This exclusive forum provisions is intended to apply to claims arising under Israeli Law and would not apply to claims brought pursuant to the Securities Act or the Exchange Act or any other claim for which United States federal courts would have exclusive or concurrent jurisdiction. Such exclusive forum provision in our amended and restated articles of association will not relieve the Company of its duties to comply with federal securities laws and the rules and regulations thereunder, and shareholders of the Company will not be deemed to have waived the Company’s compliance with these laws, rules and regulations. This exclusive forum provision may limit a shareholders ability to bring a claim in a judicial forum of its choosing for disputes with the Company or its directors or other employees which may discourage lawsuits against the Company, its directors, officers and employees and may result in increased costs for claims required to be brought before Israeli courts.

 

Your rights and responsibilities as a shareholder will be governed in key respects by Israeli laws, which differs in some material respects from the rights and responsibilities of shareholders of U.S. companies.

 

The rights and responsibilities of the holders of our Ordinary Shares are governed by our amended and restated articles of association and by Israeli law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in U.S. companies. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders, and to refrain from abusing its power in such company, including, among other things, in voting at a general meeting of shareholders on matters such as amendments to a company’s amended and restated articles of association, increases in a company’s authorized share capital, mergers and acquisitions and related party transactions requiring shareholder approval, as well as a general duty to refrain from discriminating against other shareholders. In addition, a shareholder who is aware that it possesses the power to determine the outcome of a vote at a meeting of the shareholders or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness toward the company. However, Israeli law does not define the substance of this duty of fairness. There is limited case law available to assist us in understanding the nature of these duties or the implications of these provisions. These provisions may be interpreted to impose additional obligations and liabilities on holders of our Ordinary Shares that are not typically imposed on shareholders of U.S. companies.

 

 

General Risk Factors

 

Our business and operations would suffer in the event of computer system failures, cyber attacks or a deficiency in our cybersecurity.

 

Despite the implementation of security measures intended to secure our data against impermissible access and to preserve the integrity and confidentiality of our data, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyber attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur material legal claims and liability, including under data privacy laws such as the GDPR, damage to our reputation, and the further development of our drug candidates could be delayed.

 

Our future success depends in part on our ability to retain our senior management team and to attract, retain and motivate other qualified personnel.

 

We are highly dependent on the members of our senior management team. The loss of their services without a proper replacement may adversely impact the achievement of our objectives. Our employees may leave our employment at any time. Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled personnel in our industry, which is likely to continue for the foreseeable future. As a result, competition for skilled personnel is intense, and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous medical device and pharmaceutical companies for individuals with similar skill sets. In addition, failure to succeed in preclinical studies or clinical trials may make it more challenging to recruit and retain qualified personnel. The inability to recruit and retain qualified personnel, or the loss of the services of any members of our senior management team without proper replacement, may impede the progress of our research, development and commercialization objectives. We do not maintain key man insurance for our senior management team.

 

We will continue to incur significant increased costs as a result of operating as a public company in the United States, and our management will be required to devote substantial time to new compliance initiatives.

 

As a public company whose Ordinary Shares are listed in the United States, we are subject to an extensive regulatory regime, requiring us, among other things, to maintain various internal controls and facilities and to prepare and file periodic and current reports and statements, including reports on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002. Complying with these requirements will be costly and time consuming. We will need to retain additional employees to supplement our current finance staff, and we may not be able to do so in a timely manner, or at all. In the event that we are unable to demonstrate compliance with our obligations as a public company in a timely manner, or are unable to produce timely or accurate financial statements, we may be subject to sanctions or investigations by regulatory authorities, such as the SEC or The Nasdaq Global Market, and investors may lose confidence in our operating results and the price of our Ordinary Shares could decline.

 

Our independent registered public accounting firm was not engaged to perform an audit of our internal control over financial reporting, and as long as we remain an emerging growth company, as such term is defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we will be exempt from the requirement to have an independent registered public accounting firm perform such audit. Accordingly, no such opinion was expressed or will be expressed any during any such period. Once we cease to qualify as an emerging growth company our independent registered public accounting firm will be required to attest to our management’s annual assessment of the effectiveness of our internal controls over financial reporting, which will entail additional costs and expenses.

 

Furthermore, we are only in the early stages of determining formally whether our existing internal control over financial reporting systems are compliant with Section 404 and whether there are any material weaknesses or significant deficiencies in our existing internal controls. These controls and other procedures are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is disclosed accurately and is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

 

We have never paid cash dividends on our share capital, and we do not anticipate paying any cash dividends in the foreseeable future.

 

We have never declared or paid cash dividends on our Ordinary Shares. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends in the foreseeable future. As a result, capital appreciation, if any, of our Ordinary Shares will be investors’ sole source of gain for the foreseeable future. In addition, Israeli law limits our ability to declare and pay dividends, and may subject our dividends to Israeli withholding taxes.

 

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations or publish negative reports regarding our business or our shares, our share price and trading volume could decline.

 

The trading market for our Ordinary Shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not have any control over these analysts and we cannot provide any assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding our shares, or provide more favorable relative recommendations about our competitors, our share price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

 

	●	the ability of our clinical trials to demonstrate safety and efficacy of our future product candidates, and other positive results;
	●	the timing and focus of our future preclinical studies and clinical trials, and the reporting of data from those studies and trials;
	●	the size of the market opportunity for our future product candidates, including our estimates of the number of patients who suffer from the diseases we are targeting;
	●	the success of competing therapies that are or may become available;
	●	the beneficial characteristics, safety, efficacy and therapeutic effects of our future product candidates;
	●	our ability to obtain and maintain regulatory approval of our future product candidates;
	●	our plans relating to the further development of our future product candidates, including additional disease states or indications we may pursue;
	●	existing regulations and regulatory developments in the United States and other jurisdictions;
	●	our plans and ability to obtain or protect intellectual property rights, including extensions of patent terms where available and our ability to avoid infringing the intellectual property rights of others;
	●	the need to hire additional personnel and our ability to attract and retain such personnel;
	●	our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
	●	our dependence on third parties;
	●	our financial performance;
	●	the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements;
	●	our ability to generate revenue and profit margin under our anticipated contracts which is subject to certain risks;
	●	difficulties in our and our partners’ ability to recruit and retain qualified physicians and other healthcare professionals, and enforce our non-compete agreements with our physicians; and
	●	our ability to restructure our operations to comply with future changes in government regulation.

 

Forward-looking statements are based on our management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and our management’s beliefs and assumptions, and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this prospectus may turn out to be inaccurate. Important factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and elsewhere in this prospectus. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements.

 

The forward-looking statements included in this prospectus speak only as of the date of this prospectus. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this prospectus. See “Where You Can Find More Information.”

 

 

USE OF PROCEEDS

 

We estimate that the net proceeds from the sale of Securities in this offering will be approximately $7.01 million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, based on an assumed initial public offering price of $6.20 per Unit, which is the midpoint of the price range set forth on the cover page of this prospectus. We will not receive any proceeds from the sale of the Ordinary Shares by the Selling Shareholders. If the underwriter exercises its option to purchase up to an additional 202,500 Ordinary Shares, and/or an additional 607,500 Warrants and/or an additional 202,500 Pre-Funded Warrants in full, we estimate that the net proceeds to us from this offering will be approximately $8.16 million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each $1.00 increase (decrease) in the assumed initial public offering price of $6.20 per Unit would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by $1.2 million, assuming that the number of Units offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of Units we are offering. An increase (decrease) of 1.0 million in the number of Units we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by $5.6 million, assuming the assumed initial public offering price stays the same.

 

We currently expect to use the net proceeds from this offering for the following purposes:

 

	●	approximately $2.50 million to complete the preclinical and clinical development and submit a 510(k) application to the FDA for our PL-14, PL-15 and PL-16 product candidates;
	●	approximately $0.50 million to complete in vitro feasibility as well as preclinical studies of corticosteroid, benzodiazepine, and naloxone for our T&T platform technology product candidates; and
	●	the remainder for working capital and general corporate purposes and possible future acquisitions.

  

Although we currently anticipate that we will use the net proceeds from this offering as described above, there may be circumstances where a reallocation of funds is necessary. Due to the uncertainties inherent in the clinical development and regulatory approval process, it is difficult to estimate with certainty the exact amounts of the net proceeds from this offering that may be used for any of the above purposes on a stand-alone basis. Amounts and timing of our actual expenditures will depend upon a number of factors, including our sales, marketing and commercialization efforts, regulatory approval and demand for our product candidates, operating costs and other factors described under “Risk Factors” in this prospectus. Accordingly, our management will have flexibility in applying the net proceeds from this offering. An investor will not have the opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use the proceeds.

 

Based on our current plans, we believe that our existing cash and cash equivalents will be sufficient to enable us to fund our operating expenses and capital expenditure requirements through the end of January 2023. We anticipate that these funds, together with the net proceeds of this offering, will be sufficient to fund our operating expenses and capital expenditure requirements through 21 months after the completion of this offering. We have based this estimate on assumptions that may prove to be incorrect, and we could use our available capital resources sooner than we currently expect. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Liquidity and Capital Resources – Financings Requirements”.

 

Pending our application of the net proceeds from this offering, we plan to invest such proceeds in short-term, investment-grade, interest-bearing securities and depositary institutions.

 

 

DIVIDEND POLICY

 

We have never declared or paid any cash dividends to our shareholders of our Ordinary Shares, and we do not anticipate or intend to pay cash dividends in the foreseeable future. Payment of cash dividends, if any, in the future will be at the discretion of our board of directors in compliance with applicable legal requirements and will depend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, business prospects, our strategic goals and plans to expand our business, applicable law and other factors that our board of directors may deem relevant.

 

The Israeli Companies Law imposes further restrictions on our ability to declare and pay dividends. See “Description of Share Capital—Dividend and Liquidation Rights” for additional information.

 

Payment of dividends may be subject to Israeli withholding taxes. See “Taxation—Material Israeli Tax Considerations” for additional information.

 

 

CAPITALIZATION

 

The following table sets forth our cash and cash equivalents and our capitalization as of June 30, 2022:

 

●

on an actual basis.

 

●

Pro Forma data gives effect to the following events as if each event had occurred on or before June 30, 2022: (i) the conversion of 311,457 preferred shares into 311,457 Ordinary Shares, (ii) the issuance of 115,962 Ordinary Shares pursuant to the 2022 SAFEs (defined below), based on an assumed offering price of $6.20 per Ordinary Share, which is the midpoint of the price range set forth on the cover page of this prospectus; (iii) a 1-for-8.80 reverse stock split effected on September 29, 2022; and (iv) the Forward Share Split.

 

●

on a pro forma as adjusted basis to give effect to the additional issuance of 1,350,000 Units in this offering, at an assumed public offering price of $6.20 per Unit, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses, as if the sale of the securities had occurred on June 30, 2022.

 

The pro forma as adjusted information set forth in the table below is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.

 

You should read this table in conjunction with the sections titled “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.

 

		As of June 30, 2022
U.S. dollars in thousands		Actual				Pro Forma				Pro Forma As Adjusted (1)
		(Unaudited)
Temporary equity, no par value per share; 311,457 shares authorized, 311,457 shares issued and outstanding, actual; and no shares authorized, issued and outstanding pro forma; and pro forma as adjusted		$	248				-				-
Shareholders’ equity:
Ordinary shares, no par value per share; 19,752,250 shares authorized, 3,883,940 shares issued and outstanding; 19,752,250 shares authorized and 4,311,359 shares issued and outstanding, pro forma; 19,752,250 shares authorized and 5,661,359 shares issued and outstanding, pro forma, as adjusted		$	-				-				-
Additional paid-in capital		$	1,980				2,945				9,595
Accumulated deficit		$	(2,734	)			(2,734	)			(2,734	)
Total shareholders’ equity (deficit)		$	(754	)			211				6,861
Total capitalization		$	(754	)			211				6,861

 

(1)

Each $1.00 increase or decrease in the assumed initial public offering price of $6.20 per Unit, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, respectively, the amount of cash, cash equivalents and short-term deposits, total shareholders’ (deficiency) equity and total capitalization by $1.2 million, assuming the number of Units offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of Units we are offering. An increase or decrease of 1.0 million in the number of Units we are offering would increase or decrease, respectively, the amount of cash, cash equivalents and short-term deposits, total shareholders’ (deficiency) equity and total capitalization by $5.6 million, assuming the assumed initial public offering price per Unit, as set forth on the cover page of this prospectus, remains the same. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

 

The number of the Ordinary Shares to be issued and outstanding immediately after this offering as shown above assumes that all of the Ordinary Shares offered hereby are sold, and is based on 4,311,359 Ordinary Shares issued and outstanding as of the date of this prospectus. This number excludes:

 

●

209,327 Ordinary Shares issuable upon the exercise of options to directors, employees and consultants under our incentive option plan outstanding as of such date, with an exercise price at a range of $0.2282-$0.3808 per share, of which 175,631 were vested as of such date (including 33,417 options which vests upon the completion of this offering); and

 

●

such number of Ordinary Shares issuable upon the exercise of options representing 2.5% of the Company’s post-initial public offering issued and outstanding shares which shall vest and become exercisable over a total period of three years commencing on the grant date on a monthly basis in equal installments which will be granted to Company’s Chief Executive Officer subsequent to the completion of this offering.

 

●

29,350 options to purchase 29,350 Ordinary Shares of the Company in consideration for NIS 0.352 per option, the options will vest and become exercisable over a period of eleven (11) months commencing on the grant date, on a monthly basis in equal instalments which will be granted to Company’s CRDO subsequent to the completion of this offering.

 

●

258,065 Ordinary Shares issuable upon the exercise of options issued to one of Company’s shareholders, at an exercise price of $7.75 (125% of the price per Unit in this offering). The option expires 3 years after the date of a successful completion of this offering.

 

●

347,880 Ordinary Shares issuable upon the exercise of SAFE Warrants (defined below) at an exercise price of $5.825.

 

●

290,673 Ordinary Shares reserved for future issuance under our incentive option plan.

 

 

DILUTION

 

If you invest in our securities, your interest will be immediately diluted to the extent of the difference between the initial public offering price per Ordinary Share in this offering and the pro forma as adjusted net tangible book value per Ordinary Share after this offering. Dilution results from the fact that the initial public offering price per Ordinary Share is substantially in excess of the net tangible book value per Ordinary Share. As of June 30, 2022, we had a historical net tangible book value of $(0.75 million), or $(0.19) per Ordinary Share. Our net tangible book value per share represents total tangible assets less total liabilities, divided by the number of Ordinary Shares outstanding on June 30, 2022.

 

Our pro forma net tangible book value as of June 30, 2022 was $0.21 million, or $0.05 per Ordinary Share. Pro forma net tangible book value per share represents total tangible assets less total liabilities, divided by the number of Ordinary Shares outstanding as of June 30, 2022, after giving effect to (i) the conversion of 311,457 preferred shares into 311,457 Ordinary Shares; (ii) the issuance of 115,962 Ordinary Shares pursuant to the 2022 SAFEs (defined below), based on an assumed offering price of $6.20 per Ordinary Share, which is the midpoint of the price range set forth on the cover page of this prospectus; (iii) the 1-for-8.80 reverse stock split effected on September 29, 2022; and (iv) the Forward Share Split.

 

After giving additional effect to the sale of 1,350,000 Units in this offering at an assumed initial public offering price of $6.20 per Unit, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value at June 30, 2022 would have been $6.86 per Ordinary Share. This represents an immediate increase in pro forma as adjusted net tangible book value of $1.16 per share to existing shareholders and immediate dilution of $4.99 per Ordinary Share to new investors.

 

The following table illustrates this dilution per Ordinary Share:

 

Assumed initial public offering price per Unit							$	6.20
Historical net tangible book value per share as of June 30, 2022			$	(0.19	)
Increase in net tangible book value per share attributable to the pro forma adjustments described above				0.24
Pro forma net tangible book value per share				0.05
Increase in net tangible book value per share attributable to new investors participating in this offering			$	1.16
Pro forma as adjusted net tangible book value per share after this offering							$	1.21
Dilution per share to new investors participating in this offering							$	4.99

 

The pro forma and pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing. A $1.00 increase (decrease) in the assumed initial public offering price of $6.20 per Unit, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value as of June 30, 2022 after this offering by approximately $0.22 per Ordinary Share, and would increase (decrease) dilution to investors in this offering by $0.78 per Ordinary Share, assuming that the number of Units offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of Units we are offering. An increase (decrease) of 1.0 million in the number of Units we are offering would increase (decrease) our pro forma as adjusted net tangible book value as of June 30, 2022 after this offering by approximately $0.66 per Ordinary Share, and would decrease (increase) dilution to investors in this offering by approximately $0.66 per Ordinary Share, assuming the assumed initial public offering price per Ordinary Share remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

If the underwriter exercises in full its option to purchase additional Ordinary Shares, Warrants and/or Pre-Funded Warrants, the pro forma as adjusted net tangible book value will increase to $1.37 per Ordinary Share, representing an immediate increase in pro forma as adjusted net tangible book value to existing shareholders of $1.32 per Ordinary Share and an immediate dilution of $4.83 per Ordinary Share to new investors participating in this offering.

 

 

The following table shows, as of June 30, 2022, on a pro forma as adjusted basis, the number of Ordinary Shares purchased from us as part of the Units, the total consideration paid to us and the average price paid per share by existing shareholders and by new investors purchasing Units in this offering at an assumed initial public offering price of $6.20 per Unit, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us:

 

		Shares								Total Consideration								Average Price Per Ordinary
		Number				Percent				Amount				Percent				Share
Existing shareholders			4,195,397				74.1	%		$	2,478,000				21.4	%		$	0.59
SAFE shareholders			115,962				2.0	%			719,000				6.2	%		$	6.20
New investors			1,350,000				23.9	%		$	8,370,000				72.4	%		$	6.20
Total			5,661,359				100.0	%		$	11,567,000				100	%		$	2.04

 

A $1.00 increase (decrease) in the assumed initial public offering price of $6.20 per Unit (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the total consideration paid by investors participating in this offering, total consideration paid by all shareholders and the average price per share paid by all shareholders by approximately $1.2 million, $1.2 million and $0.22, respectively, assuming that the number of Units offered by us, as set forth on the cover page of this prospectus, remains the same and before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, a 1.0 million share increase (decrease) in the number of Units offered by us, as set forth on the cover of this prospectus, would increase (decrease) the total consideration paid by investors participating in this offering, total consideration paid by all shareholders and the average price per share paid by all shareholders by approximately $5.6 million, $5.6 million and $0.66, respectively, assuming the assumed initial public offering price of $6.20 per Unit (the midpoint of the price range set forth on the cover page of this prospectus) remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

The number of the Ordinary Shares to be issued and outstanding immediately after this offering as shown above assumes that all of the Ordinary Shares offered hereby are sold, and is based on 4,311,359 Ordinary Shares issued and outstanding as of the date of this prospectus. This number excludes:

 

●

209,327 Ordinary Shares issuable upon the exercise of options to directors, employees and consultants under our incentive option plan outstanding as of such date, with an exercise price at a range of $0.2282-$0.3808 per share, of which 175,631 were vested as of such date (including 33,417 options which vests upon the completion of this offering); and

 

●

such number of Ordinary Shares issuable upon the exercise of options representing 2.5% of the Company’s post-initial public offering issued and outstanding shares which shall vest and become exercisable over a total period of three years commencing on the grant date on a monthly basis in equal installments which will be granted to Company’s Chief Executive Officer subsequent to the completion of this offering.

 

●

29,350 options to purchase 29,350 Ordinary Shares of the Company in consideration for NIS 0.352 per option, the options will vest and become exercisable over a period of eleven (11) months commencing on the grant date, on a monthly basis in equal instalments which will be granted to Company’s CRDO subsequent to the completion of this offering.

 

●

258,065 Ordinary Shares issuable upon the exercise of options issued to one of Company’s shareholders, at an exercise price of $7.75 (125% of the price per Unit in this offering). The option expires 3 years after the date of a successful completion of this offering.

 

●

347,880 Ordinary Shares issuable upon the exercise of SAFE Warrants (defined below) at an exercise price of $5.825.

 

●

290,673 Ordinary Shares reserved for future issuance under our incentive option plan.

 

To the extent that outstanding options are exercised, new options or warrants are issued or we issue additional Ordinary Shares in the future, there will be further dilution to new investors. We may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our equity holders.

 

In addition, in January 2022, June 2022 and August 2022, we signed the 2022 SAFEs, with the SAFE Investors for an aggregate amount of approximately $719,000. Pursuant to the terms of the 2022 SAFEs, upon consummation of a Qualified Equity Financing (which is defined as at least $300,000 aggregate proceeds), we will issue to each SAFE Investor the number of most senior class of shares issued in the Qualified Equity Financing equal to the Investment Amount divided by the discount price (which is defined as the lowest price per SAFE share sold in the Equity Financing discounted by to 20%). In addition, the right to receive SAFE shares shall also include the right to receive warrants or other convertible instruments granted to the investors in the Equity Financing, if granted. The 2022 SAFEs provide that, immediately prior to the closing of an initial public offering of the Company, the number of ordinary shares issuable to each SAFE Investor is equal to the purchase amount of each 2022 SAFE divided by the price per share determined by the Company and the underwriter in the initial public offering. The 2022 SAFEs will automatically expire and terminate upon the earliest to occur of either (i) the issuance of SAFE shares pursuant to (A) a Qualified Equity Financing, (B) an optional conversion in a financing that is not a Qualified Equity Financing, (C) a change of control of the Company, (D) a public offering or (E) a mandatory conversion if the Investment Amount has not been converted prior to July 31, 2023 and (ii) the payment, or setting aside for payment, of amounts due to the SAFE Investors following a dissolution event, excluding a change of control, of the Company. Accordingly, upon the closing of this offering, in addition to issuing to each SAFE Investor Ordinary Shares, we will also issue to each SAFE Investor three SAFE Warrants, each to purchase one Ordinary Share at an exercise price of $5.825 (based on an assumed public offering price of $6.20 per Unit, the midpoint of the price range of the Units) per Ordinary Share (with such exercise price equal to the public offering price per Unit less $0.125 per Warrant included in the Unit). Upon the completion of this offering, and based on an assumed conversion price equal to $6.20, the midpoint of the price range set forth on the cover page of this prospectus, we expect to issue Ordinary Shares upon the automatic conversion of the SAFEs. All share capital information in this prospectus assumes or gives effect to such issuance of shares as if it has already occurred.

  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

 

You should read the following discussion in conjunction with our audited financial statements including the related notes thereto, beginning on page F-1 of this prospectus. In addition to historical information, this discussion contains forward-looking statements that involve risks and uncertainties. You should read the sections of this prospectus titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” for a discussion of the factors that could cause our actual results to differ materially from our expectations.

 

Overview

 

We are a development stage biotech company specializing in the development of innovative hydrogels delivered in the form of nasal sprays, and form a thin hydrogel-based shield containment barrier in the nasal cavity that can provide a barrier against viruses and allergens from contacting the nasal epithelial tissue. Our proprietary C&C hydrogel technology, comprised of a mixture of naturally occurring building blocks, is delivered in the form of nasal sprays, and potentially functions as a “biological mask” with a thin shield containment barrier in the nasal cavity. We are further developing certain aspects of our C&C hydrogel technology such as the bioadhesion and prolonged retention at the nasal deposition site for intranasal delivery of drugs. We refer to our separate platform technology that is focused on nasal delivery of APIs as T&T.

 

We have experienced net losses since our inception in 2005. We incurred net losses of $711,000 and $73,000 for the years ended December 31, 2021 and December 31, 2020, respectively. We incurred net losses of $592,000 and $153,000 for the six months ended June 30, 2022 and 2021, respectively.  As of June 30, 2022, we had an accumulated deficit of $2.7 million. We anticipate that we will continue to incur significant losses for the foreseeable future as our operating expenses and capital expenditures increase substantially due to our continued investment in our research and development activities and as we hire additional employees over the coming years. Furthermore, upon closing of this offering, we expect to incur additional expenses associated with operating as a U.S. public company, including significant legal, accounting, investor relations and other expenses.

 

For further information regarding our business and operations, see “Business” below.

 

Components of Operating Results

 

Revenues

 

We have not recognized any revenue to date and we do not expect to generate revenue from the sale of product candidates in the near future.

 

Research and Development Expenses

 

Research and development activities related to our product candidates are our primary focus. We do not believe that it is possible at this time to accurately project total expenses required for us to reach the point at which we will be ready to out-license our technologies. Development timelines, the probability of success and development costs can differ materially from expectations. In addition, we cannot forecast whether and when collaboration arrangements will be entered into, if at all, and to what degree such arrangements would affect our development plans and capital requirements. We expect our research and development expenses to increase over the next several years as our development program progresses. We would also expect to incur increased research and development expenses if we were to identify and develop additional technologies.

 

Research and development expenses include the following:

 

●

employee-related expenses, such as salaries and share-based compensation;

 

●

expenses relating to outsourced and contracted services, such as consulting, research and advisory services;

 

●

supply and development costs;

 

●

expenses incurred in operating our small-scale equipment; and

 

●

costs associated with regulatory compliance.

 

We recognize research and development expenses as we incur them.

 

 

General and Administrative Expenses

 

General and administrative expenses consist primarily of personnel costs, related to directors, executive, finance, and human resource functions, facility costs and external professional service costs, including legal, accounting, marketing and audit services and other consulting fees.

 

We anticipate that our general and administrative expenses will increase in the future as we increase our administrative headcount and infrastructure to support our continued research and development programs and the potential commercialization of our product candidates. We also anticipate that we will incur increased expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements, director and officer insurance premiums, director compensation, and other costs associated with being a public company.

 

Finance Expenses, Net

 

Our net financing expenses consist primarily of differences in the exchange rate between NIS and the U.S. Dollar.

 

Income Taxes

 

We have yet to generate taxable income in Israel. As of December 31, 2021, our operating tax loss carryforwards were approximately NIS 7.9 million ($2.3 million). We anticipate that we will continue to generate tax losses for the foreseeable future and that we will be able to carry forward these tax losses indefinitely to future taxable 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.

 

Results of Operations

 

Our results of operations have varied in the past and can be expected to vary in the future due to numerous factors. We believe that period-to-period comparisons of our operating results are not necessarily meaningful and should not be relied upon as indications of future performance.

 

Our results of operations for the years ended December 31, 2021 and 2020 and the six months ended June 30, 2022 and 2021 were as follows:

 

		For the Six Months Ended June 30,								For the Years Ended December 31,
(U.S. dollars in thousands except share and per share data)		2022				2021				2021				2020
Statement of Operations:
Research and Development Expenses		$	247				90			$	245				38
General and Administrative Expenses			325				61				458				34
Operating Loss			572				151				703				72
Financing Expenses, net			20				2				8				1
Net Loss and Comprehensive Loss			592				153				711				73
Basic and Diluted Net Loss per Share		$	0.16				0.13			$	0.36				0.20
Weighted average number of shares outstanding used in computing basic and diluted net loss per share			3,883,940				1,345,052				2,103,915				587,063

 

Research and Development Expenses

 

The following table describes the breakdown of our research and development expenses for the indicated periods:

 

		For the Six Months Ended June 30,								For the Years Ended December 31,
(U.S. dollars in thousands except share and per share data)		2022				2021				2020				2019
Subcontractors and consultants		$	56				20			$	61			$	25
Payroll and related expenses			114				69				19				10
Share based payment			73				-				162				-
Patents			4				1				3				3
Total research and development expenses		$	247				90			$	245			$	38

 

 

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021 and Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

 

Our research and development expenses for the six months ended June 30, 2022 and 2021 were $247,000 and $90,000, respectively. The increase of $157,000, or 174.4%, is mainly attributed to an increase of $45,000 in payroll an increase of $73,000 in share based payment expenses and an increase of $36,000 from subcontractors and consultants’ expenses. The increase in Company’s expenses was due to increase in Company’s activity and from grant of options in the second half of 2021.

 

Our research and development expenses for the years ended December 31, 2021 and 2020 were $245,000 and $38,000, respectively. The increase of $207,000, or 544%, is mainly attributed to an increase of $162,000 in share based payment due to options grant during 2021, an increase $36,000 from subcontractors and consultants’ expenses and from $9,000 in payroll and related expenses due to increase in our research activity and increase in number of employees.

 

General and Administrative Expenses

 

The following table describes the breakdown of our general and administrative expenses for the indicated periods:

 

 

		For the Six Months Ended June 30,								For the year ended December 31,
(U.S. dollars in thousands)		2022				2021				2021				2020
Payroll and related expenses		$	86				32			$	138			$	19
Professional services			196				21				281				8
Share based payment			17				-				22				-
Office maintenance			11				2				17			$	7
Others			15				6				-				-
		$	325				61			$	458				34

 

Our general and administrative expenses for the six months ended June 30, 2022 and 2021 were $325,000 and $61,000, respectively. The increase of $264,000, or 432.8%, is primarily attributable to an increase in payroll and related expenses and increase in professional services. The increase is mainly attributed to increase in Company’s activity and increase of Chief Executive Officer’s salary.

 

Our general and administrative expenses for the years ended December 31, 2021 and 2020 were $458,000 and $34,000, respectively. The increase of $424,000, or 1,247%, is mainly attributed to an increase in professional services and payroll and related expenses. The increase is mainly related to an increase in the company’s research and development activity, business activity and initial public offering-related activity, which necessitated more administrative expenses.

 

Financing Expenses

 

Our financing expenses for the six months ended June 30, 2022 and 2021 and the years ended December 31, 2021 and 2020, were immaterial.

 

 

Critical Accounting Policies and Estimates

 

We describe our significant accounting policies and estimates in Note 2 to our annual financial statements contained elsewhere in this prospectus.

 

We prepare our financial statements in accordance with U.S. GAAP.

 

In preparing these financial statements, management has made judgments, estimates and assumptions that affect the application of our accounting policies and the reported amounts recognized in the financial statements. On a periodic basis, we evaluate our estimates, including those related to share-based compensation and derivatives. We base our estimates on historical experience, authoritative pronouncements and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

 

For the periods included in the financial statements, we do not believe there are critical accounting estimates that are subject to uncertainty or that have significantly changed during the relevant periods.

 

Recently-Issued Accounting Pronouncements

 

Certain recently-issued accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to the financial statements included in elsewhere in this registration statement, regarding the impact of the U.S. GAAP standards as issued by the FASB that we will adopt in future periods in our financial statements.

 

Emerging Growth Company Status

 

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

 

●

a requirement to present only two years of audited financial statements in addition to any required interim financial statements and correspondingly reduced Management’s Discussion and Analysis of Financial Condition and Results of Operations disclosure;

 

●

to the extent that we no longer qualify as a foreign private issuer, (i) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (ii) exemptions from the requirement to hold a non-binding advisory vote on executive compensation, including golden parachute compensation;

 

●

an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; and

 

●

an exemption from compliance with the requirement that the Public Company Accounting Oversight Board has adopted regarding a supplement to the auditor’s report providing additional information about the audit and the financial statements.

 

 

We may take advantage of these exemptions for up to five years or until such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of: (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; (iii) the date on which we are deemed to be a large accelerated filer under the rules of the SEC; or (iv) the last day of the fiscal year following the fifth anniversary of this offering. We may choose to take advantage of some but not all of these exemptions. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This means that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more difficult

 

Liquidity and Capital Resources

 

Since our inception, we have incurred losses and negative cash flows from our operations. For the year ended December 31, 2021, we incurred a net loss of $711,000 while net cash of $492,000 was used in our operating activities.  For the six months ended June 30, 2022, we incurred a net loss of $592,000 while net cash of $779,000 was used in our operating activities. As of June 30, 2022, we had a negative working capital of $372,000, and an accumulated deficit of $2,734,000. As of June 30, 2022, our cash and cash equivalents totaled approximately $195,000. We believe that after the completion of this offering our cash and cash equivalents will enable us to fund our operations through 21 months following the completion of this offering.

 

Through June 30, 2022, we have financed our operations primarily through private placements. Total invested capital as of June 30, 2022 was $3.2 million, which included Ordinary Shares, preferred shares, option to purchase Ordinary Shares and SAFE agreements.

 

The following table summarizes our statement of cash flows for the years ended December 31, 2021 and 2020 and the six months periods ended June 30, 2022 and 2021:

 

		For the Six Months Ended June 30,								For the Years Ended December 31,
(U.S. dollars in thousands except share and per share data)		2022				2021				2021				2020
Net cash used in operating activities		$	(779	)			(102	)		$	(492	)			(73	)
Net cash used in investing activities			(3	)			(17	)			(19	)			(6	)
Net cash provided by financing activities			454				150				1,024				89
Increase in cash and cash equivalents		$	(328	)			31			$	513				10

 

Net cash used in operating activities

 

Net cash used in operating activities was $779,000 and $102,000 for the six months ended June 30, 2022 and 2021, respectively. The $677,000 increase was attributable primarily to an increase in our net loss due to increase in Company’s activity.

 

Net cash used in operating activities was $492,000 and $73,000 for the years ended December 31, 2021 and 2020, respectively. The $419,000 increase was attributable primarily to the increase in our net loss, due to increase in Company’s activity. 

 

Net cash used in investing activities

 

Net cash used in investing activities was $3,000 and $17,000 for the six months ended June 30, 2022 and 2021, respectively. The $14,000 decrease is mainly due to lower purchase of fixed assets in the six months ended June 30, 2022 compared with the same period in 2021.

 

Net cash provided by financing activities was $1,024,000 and $89,000 for the years ended December 31, 2021 and 2020, respectively. The increase was due to an increase in financing activity related to Share purchase agreements.

 

 

Net cash provided by financing activities

 

Net cash provided by financing activities was $454,000 and $150,000 for the six months ended June 30, 2022 and 2021, respectively. The $304,000 increase was due to an increase in financing activity related to issuance of SAFE agreements in 2022.

 

Net cash provided by financing activities was $1,024,000 and $89,000 for the years ended December 31, 2021 and 2020, respectively. The increase was due to an increase in financing activity related to Share purchase agreements.

 

Funding Requirements

 

We have incurred losses and cash flow deficits from operations since the inception, resulting in an accumulated deficit at June 30, 2022 of approximately $2.7 million. We anticipate that we will continue to incur net losses for the foreseeable future. We believe that our existing cash and cash equivalents will be sufficient to fund our projected cash needs until the end of January 2023. To meet future capital needs, we would need to raise additional capital through equity or debt financing or other strategic transactions. However, any such financing may not be on favorable terms or even available to us. Our failure to obtain sufficient funds on commercially acceptable terms when needed would have a material adverse effect on our business, results of operations and financial condition. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and the actual amount of our expenses could vary materially and adversely as a result of a number of factors. We have based our estimates on assumptions that may prove to be wrong, and our expenses could prove to be significantly higher than we currently anticipate.

 

Our future capital requirements will depend on many factors, including, but not limited to:

 

●

the progress and costs of our research and development activities;

 

●

the costs of development and expansion of our operational infrastructure;

 

●

our ability, or that of our collaborators, to achieve development milestones and other events or developments under potential future licensing agreements;

 

●

the amount of revenues and contributions we receive under future licensing, collaboration, development and commercialization arrangements with respect to our technologies;

 

●

the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;

 

●

the costs of contracting with third parties to provide sales and marketing capabilities for us or establishing such capabilities ourselves, once our technologies are developed and ready for commercialization;

 

●

the costs of acquiring or undertaking development and commercialization efforts for any future product candidates or technology;

 

●

the magnitude of our general and administrative expenses; and

 

●

any additional costs that we may incur under future in- and out-licensing arrangements relating to our technologies and futures product candidates.

 

Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through capital raising or by out-licensing and/or co-developing applications of one or more of our product candidates. We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not available on favorable terms, or at all, we may be required to delay, reduce the scope of or eliminate research or development efforts or plans for commercialization with respect to our technologies and make necessary change to our operations to reduce the level of our expenditures in line with available resources. This may raise substantial doubts about our ability to continue as a going concern.

 

 

We are a development-stage biotech company and it is not possible for us to predict with any degree of accuracy the outcome of our research and development efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net loss, liquidity or capital resources, or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certain trends, uncertainties, demands, commitments and events are described herein.

 

Contractual Obligations

 

As of June 30, 2022, we had the following contractual obligations:

 

During 2007-2010 we received funding from the IIA (previously known as Officer of Chief Scientist) for its participation in research and development costs, based on budgets approved by the IIA, subject to the fulfillment of specified milestones. The Company is committed to pay royalties to the IIA on proceeds from sale of product candidates in the research and development of which the IIA participates by way of grants. Royalties between 3% and 4.5% are payable on sales of developed product candidates funded, up to 100% of the funding received by the Company, linked to US dollar and bearing LIBOR interest rate. In the case of failure of a financed project, the Company is not obligated to pay any such royalties to the IIA. The total grant amount received from the IIA, including interest, as of June 30, 2022 is $739,000.

 

On September 1, 2021, we signed a consulting agreement with its Chief Executive Officer. According to the agreements, the Chief Executive Officer is entitle to receive among other things: (i) a one-time NIS 150,000 (approximately USD 48) bonus upon completion of the Company’s initial public offering, (ii) options representing 0.5% of our pre-initial public offering issued and outstanding shares which will vest upon the completion of our initial public offering and become exercisable for a period of 5 years, and (iv) options representing 2.5% of our post IPO issued and outstanding shares which shall vest and become exercisable over a total period of three years commencing on the grant date on a monthly basis in equal installments.

 

On May 29,2022, the Company and the Company’s CRDO entered into a new employment agreement. Under the new employment agreement and subject to a successful completion of the Company's IPO, the Company (1) shall grant the CRDO options to purchase 29,350 Ordinary Shares of the Company in consideration for NIS 0.352 per option, the options will vest and become exercisable over a period of eleven (11) months commencing on the grant date, on a monthly basis in equal instalments; and (2) may grant the CRDO options to purchase Ordinary Shares of the Company representing up to 2% of the Company’s post IPO issued and outstanding share-capital, these options will vest and become exercisable over a period of three years commencing on the grant date, on a quarterly basis in equal instalments.

 

Quantitative and Qualitative Disclosures About Market Risk

 

Liquidity Risk

 

Liquidity risk is the risk that we will encounter difficulty in meeting the obligations associated with our financial liabilities that are settled in cash. Cash flow forecasting is performed in our operating entity level. We monitor forecasts of our liquidity requirements to ensure we have sufficient cash to meet operational needs. We may be reliant on our ability to raise additional investment capital from the issuance of both debt and equity securities to fund our business operating plans and future obligations.

 

Credit risk

 

Credit risk is the risk of financial loss to us if a debtor or counterparty to a financial instrument fails to meet its contractual obligations, and arises mainly from our receivables.

 

We restrict exposure to credit risk in the course of our operations by investing only in bank deposits.

 

Equity price risk

 

As we have not invested in securities riskier than short-term bank deposits, we do not believe that changes in equity prices pose a material risk to our holdings. However, decreases in the market price of our Ordinary Shares could make it more difficult for us to raise additional funds in the future or require us to raise funds at terms unfavorable to us.

 

Inflation risk

 

We do not believe that inflation has had a material effect on our business, financial condition or results of operations in the reporting period. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through hedging transactions. Our inability or failure to do so could harm our business, financial condition and results of operations.

 

Foreign Currency Exchange Risk

 

Currency fluctuations could affect us through increased or decreased costs, mainly for goods and services acquired outside of Israel. Currency fluctuations did not have a material effect on our results of operations during the six months ended June 30, 2022 and the years ended December 31, 2021 and 2020.

 

 

BUSINESS

 

Overview

 

We are a development stage biotech company specializing in the development of innovative medical device hydrogels delivered in the form of nasal sprays, which form a thin hydrogel-based shield containment barrier in the nasal cavity that can provide a barrier against viruses and allergens from contacting the nasal epithelial tissue. Our C&C, hydrogel technology, comprised of a mixture of naturally occurring building blocks, is delivered in the form of nasal sprays, and potentially functions as a “biological mask” with a thin shield containment barrier in the nasal cavity. We are further developing certain aspects of our proprietary C&C hydrogel technology such as the bioadhesion and prolonged retention at the nasal deposition site for intranasal delivery of drugs. We refer to our separate platform technology that is focused on nasal delivery of APIs, as T&T.

 

Our Product Candidates

 

Our nasal hydrogels have been designed to serve as a non-invasive and fast-acting system. The hydrogels are formulated as an innovative mixture of mucoadhesive polymers (e.g., sodium alginate) which are GRAS by the FDA. Our mucoadhesive polymers derived from seaweed polysaccharides possess promising features as they are renewable, biodegradable, biocompatible, and environment friendly. The formulated hydrogel is sprayed into the nose to create a physical barrier with long-lasting adhesion to the mucosal membranes. Our polymers have an atomic mass much higher than the upper cell penetration limit, the polymers will simply lay on top of the cells and act as a physical barrier to viruses and allergens from contacting the nasal epithelial tissue, as opposed to penetrating the cells and causing a chemical reaction. Therefore, the C&C product candidates are not expected to be considered as drugs by the FDA but as medical devices.

 

Our leading technologies are C&C and T&T. The C&C provides a barrier against a wide range of allergen particulates and viruses.

 

PL-14 – Nasal Allergies Blocker

 

o

We expect our PL-14 product candidate to be regulated as a Class II medical device by the FDA under its 510(k) pathway.

 

o

Our PL-14 product candidate is scheduled to initiate preclinical safety trials in the third quarter of 2023. In addition, pivotal clinical trial on our PL-14 product candidate is expected to commence in the second quarter of 2024, following which we plan to submit a 510(k) application for FDA clearance.

 

o

For our PL-14 product candidate, we will pursue the 510(k) pathway which requires a manufacturer to demonstrate substantial equivalence to an FDA-cleared device (i.e., predicate device) to a subject device (i.e., our product candidate). This process for clearing our device with the FDA entails performing a medical device analysis of the product candidates (e.g., PL-14 product candidate) description, operational principle, potential accessories and proposed intended use, for the purpose of identifying a predicate device that has already been cleared by the FDA. Through this review, we found three possible predicate devices for establishing substantial equivalence, Alzair, Nasalease and Bentrio. There is no guarantee that PL-14 product candidate will advance in the FDA 510(k) process at the same rate as the aforementioned predicate devices or will reach commercialization.

 

o

The estimated timeline for obtaining 510(k) clearance for our PL-14 product candidate is based on the estimated time needed for the following activities: (i) GMP manufacturing of our clinical trial materials, which usually requires 9-12 months; (ii) Biocompatibility preclinical studies, which usually requires 3-6 months (although these studies may be performed concurrently with the GMP manufacturing mentioned above); (iii) Clinical trials, which usually requires 6-12 months; and (iv) FDA submission and clearance, which usually requires 3-12 months. Regarding FDA submission and clearance, generally 510(k) applicants can expect submission acceptance review decisions within 15 calendar days, substantive review decisions within 60 days, and final decisions within 90 days. In the case of our predicate devices for our PL-14 product candidate, Alzair, Nasalese and Bentrio, the FDA submission and clearance process took 86 and 140 days, respectively. For additional information, please see “Business – FDA clearance plan for our C&C product candidates.”

 

PL-15 – COVID-19 and PL-16 – Influenza Blockers

 

o

We expect our PL-15 and PL-16 product candidates, which provide a barrier against COVID-19 and influenza from contacting the nasal epithelial tissue, respectively, to be regulated as a Class II medical device under a De Novo Classification request. For the clinical studies planned for PL-15 & PL-16 which will include human subjects; the Investigational Device Exemptions (IDE) regulation describes three types of device studies: significant risk (SR), nonsignificant risk (NSR), and exempt studies. During the first quarter following the closing of this offering, the company intends to schedule a pre-submission meeting with the FDA to determine the IDE regulation type of device studies for PL-15 & PL-16. Our proposed 12-month interval from the scheduled FDA pre-sub meeting to the planned IDE clinical trial initiation should provide ample time to fulfill the necessary tasks for the IDE filing, such as 1) reporting previous studies to support the IDE, 2) preparing IDE required design and manufacturing control documentation, 3) conducting bench and biocompatibility tests to support safety of the device prior to starting the a human study, and 4) obtaining clinical protocol and ethics committee approvals as well as FDA IDE approval to start the clinical trial. Once IDE has been initiated, Polyrizon will comply with FDA Guidance “Changes or Modifications During the Conduct of a Clinical Investigation”, 2001.

 

 

o

Our PL-15 product candidate is scheduled to initiate preclinical safety trials in the third quarter of 2023, subject to securing additional financing, feasibility clinical trials in the first quarter of 2025 and pivotal clinical trials in the second quarter of 2025. Following these trials, we plan to submit De Novo Classification requests for each product candidate. Our PL-16 product candidate is scheduled to initiate preclinical safety trials in the third  quarter of 2023, feasibility clinical trials in the second quarter of 2024 and, subject to securing additional financing, pivotal clinical trials in the first quarter of 2025. Following these trials, we plan to submit De Novo Classification requests for each product candidate.

 

o

Upon a review similar to the one performed for our PL-14 product candidate, we found that there were no potential predicate devices in the FDA’s database matching the proposed intended uses of our PL-15 and PL-16 product candidates. Because of this, we will pursue a De Novo Classification request for each product candidate. This pathway involves demonstrating that the product candidates provide a reasonable assurance of safety and effectiveness. During the first quarter following the closing of this offering, we intend to submit a Q-submission (Pre-submission) for each product candidate and request a pre-submission meeting with FDA’s CDRH to confirm the potential for this regulatory path. For more information, please see “Business – Our Product Candidates – The determination process for the C&C product candidates as a Class II medical devices.”

 

o

The estimated timeline for marketing authorization via De Novo Classification grant for our PL-15 & PL-16 product candidates is based on taking similar steps as the steps described above for obtaining 510(k) clearance for ourPL-1 product candidate. We estimate a longer period of time for the entire grant process for each of these product candidates due to possibly extended clinical trials requested by the FDA and also due to a longer review timeframe. For additional information, please see “Business – FDA clearance plan for our C&C product candidates.”

 

In the event the FDA does not agree with our regulatory assessments regarding the C&C product candidates 510(k) for our PL-14 product candidate, and Class II De Novo pathway for our PL-15& PL-16 product candidates), the FDA may require us to go through a lengthier, more rigorous examination than we had expected (such as PMA, which is the FDA process of scientific and regulatory review to evaluate the safety and effectiveness of Class III medical devices. If we are required to pursue a PMA, the introduction of our product candidates into the market could be delayed. For more information, please see “Risks Related to the Discovery, Development and Clinical Testing of Product Candidates.”

 

Trap and Target ™ Product Candidates

 

In contrast to our C&C product candidates, the hydrogel in the T&T product candidates is formulated differently in order to provide for sustained release of the API. The content of the hydrogel (quantity and quality) in the T&T product candidates is formulated differently than the content of C&C product candidates, and therefore enable different functions: physical barrier for the C&C product candidates and API sustained release for the T&T product candidates. It is through these differences that we rationalize the different regulatory treatment of our C&C and T&T product candidates.

 

The T&T platform technology is designed to allow a long residence time and an intimate contact with the mucosal tissue for a targeted delivery of medicines. We expect that our T&T platform product candidates will be regulated as a combination-product consisting of a nasal sprayer and formulation consisting of a hydrogel and a generic API, which we intend to pursue under the FDA’s 505(b)(2) pathway. We aim to conduct feasibility studies for our T&T platform product candidates with corticosteroids, benzodiazepines and naloxone, beginning in the second quarter of 2023 through the second quarter of 2024. Pre-clinical studies will follow and are expected to begin in the second quarter of 2024. Phase I clinical trials for each of the three product candidates of the T&T technology are planned for the fourth quarter of 2025, subject to securing additional financing.

 

The determination process for the C&C product candidates as a Class II medical devices

 

According to the FDA, a product will be considered as a medical device, and subject to FDA regulation, if it meets the following criteria: 1) recognized in the official National Formulary, or the United States Pharmacopoeia, or any supplement to them and 2) intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals; or 3) intended to affect the structure or any function of the body of man or other animals, and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals.

 

Because the intended use for each of our C&C product candidates is creating a physical barrier and its primary mode of action, or PMOA, is physical, we believe that our C&C product candidates will be regulated as Class II medical devices. We believe that our PL-14 product candidate can utilize the 510(k) pathway for alleviating allergic symptoms, and that our PL-15 and PL-16 product candidates can utilize the De Novo Classification pathway for reducing the risk of nasal infections caused by COVID-19 and influenza, respectively.

 

Because our C&C product candidates’ mode of action is based on creating a physical barrier that is not associated to chemical action within or on the body, we believe that our C&C product candidates will be classified by the FDA and similar regulatory bodies as a medical device.

 

 

Unless an exemption applies, any medical device that is to be marketed in the United States be cleared via submission of a premarket notification (i.e., 510(k)), for class II devices, or a PMA for class III devices. Alternatively, the device can be marketed following the granting of a De Novo Classification request for devices that do not have a legally marketed predicate device. We performed an FDA medical device analysis based on the PL-14 product candidate description along with potential accessories and the proposed intended use. Based on the abovementioned criteria we believe that our PL-14 product candidate’s regulatory classification is: 21 C.F.R. § 880.5045 “Medical recirculating air cleaner” (under the product code: NUP-Cream, Nasal, Topical, Mechanical Allergen Particle Barrier) which is FDA Class II requiring a 510(k) submission. This means a 510(k) submission for FDA review is required for clearance allowing it to be marketed. To provide the best possible predicate device to establish substantial equivalency within the 510(k) submission, a review of FDA’s 510(k) database for Product Code NUP was performed, which includes several possibilities for a potential predicate device, such as Alzair, Nasalese and Bentrio with intended uses of “promoting alleviation of mild allergic symptoms triggered by the inhalation of various airborne allergens.”

 

Our PL-15 and PL-16 product candidates are intended to provide a barrier against COVID-19 and influenza from contacting the nasal epithelial tissue, respectively. We performed a regulatory assessment review for our PL-15 and PL-16 product candidates where the intended use includes a “nasal mechanical virus blocker” and found that there are no valid predicate devices found in the FDA’s databases matching this intended use. The lack of available predicate devices, combined with the fact that our PL-15 and PL-16 product candidates have similar risk profile as our PL-14 product candidate (due to three product candidates using the same ingredients and method of use), we believe that our PL-15 and PL-16 product candidates may be regulated as a Class II medical device if the FDA agrees and grants a De Novo Classification request. In order to assess the likelihood of approval under a De Novo pathway, during the first quarter following the closing of this offering we intend to schedule a pre-submission meeting with the FDA, but have not yet communicated directly with the FDA regarding any of its C&C product candidates.

 

The estimated timeline for obtaining 510(k) clearance for our C&C product candidates, is based on the estimated time needed for the following activities: (i) GMP manufacturing of our clinical trial materials, which usually requires 9-12 months; (ii) Biocompatibility preclinical studies, which usually requires 3-6 months (although these studies are performed concurrently with the GMP manufacturing mentioned above); (iii) Clinical trials, which usually requires 6-12 months; and (iv) FDA submission and clearance, which usually requires 3-12 months. Regarding FDA submission and clearance, generally 510(k) applicants can expect submission acceptance review decisions within 15 calendar days, substantive review decisions within 60 days, and final decisions within 90 days. Applicants with outstanding review issues will be notified within 100 days. However, the FDA’s time of review does not include time on “hold”, which includes any time spent by us responding to any FDA information requests, meaning that the total timeframe of the review process could take longer than anticipated. In the case of our predicate devices for our PL-14 product candidate, Alzair, Nasalese and Bentrio, the FDA submission and clearance process took 86 and 140 days, respectively. For additional information, please see “Business FDA clearance plan for our C&C product candidates.”

 

Furthermore, we believe that our PL-15 and PL-16 product candidates would nevertheless still be classified as medical devices (rather than drugs), even in the event the FDA does not agree with our regulatory assessments regarding the Class II De Novo pathway based on our review of the FDA’s September 2017 guidance document entitled “Classification of Products as Drugs and Devices & Additional Product Classification Issues: Guidance for Industry and FDA Staff”. This guidance document notes that a key difference between the statutory definition of drugs and devices is that a device “does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of its primary intended purposes”. The guidance further clarifies that the term “chemical action” is consistent with “pharmaceutical action” and also provides examples of products which have been determined to be devices, one of which is a polymer that provides a physical barrier (abdominal adhesion barrier).

 

We believe that our PL-15 and PL-16 product candidates will be regulated as medical device due to the following: (i) the mode of action by which each of the PL-14 and PL-15 product candidates is creating a physical barrier, and achieving this barrier is not dependent on chemical action nor is it dependent on the product being metabolized; and (ii) the polymer used in the PL-15 and PL-16 product candidates have molecular mass that is much higher than the upper cell penetration limit. Therefore, the polymers will simply lay on top of the cells and function as a physical barrier to viruses and allergens.

 

The determination process for the T&T product candidates as a drug-device combination product

 

In contrast to our C&C product candidates, the hydrogel in our T&T product candidates is formulated differently in order to provide for sustained release of the API. The content of the hydrogel (quantity and quality) in the T&T product candidates is formulated differently than to the content of C&C product candidates, and therefore enable different functions: physical barrier for the C&C product candidates and API sustained release for the T&T product candidates. It is through these differences that we rationalize the different regulatory treatment of our C&C and T&T product candidates.

 

The T&T platform technology is designed to allow a long residence time for the API, and an intimate contact with the mucosal tissue for a targeted delivery of medicines. We expect that our T&T platform product candidates will be regulated as a drug-device combination product consisting of a nasal sprayer (the medical device) and a formulation that consists of a hydrogel and a generic API (the drug), which we intend to pursue under the FDA’s 505(b)(2) pathway. We aim to conduct feasibility studies for our T&T platform product candidates with corticosteroids, benzodiazepines and naloxone, beginning in the second quarter of 2023 through the second quarter of 2023. Pre-clinical studies will follow and are expected to begin in the second quarter of 2024. Phase I clinical trials for each of the three product candidates of the T&T technology are planned for the fourth quarter of 2025, subject to securing additional financing.

 

Background related to the C&C and T&T technologies

 

The nasal cavity is a large, air-filled space above and behind the nose in the middle of the face. Each cavity is the continuation of one of the two nostrils. The nasal cavity is the uppermost part of the respiratory system and provides the nasal passage for inhaled air from the nostrils to the nasopharynx and rest of the respiratory tract. The nasal mucosa, also called respiratory mucosa, lines the entire nasal cavity, from the nostrils to the pharynx. A dynamic layer of mucus overlies the nasal epithelium (the outermost layer of cells of the nasal mucosa).

 

 

The nasal sub-mucosa underlies the basement membrane. This layer is made up of glands which secrete watery substances and mucus, nerves, an extensive network of blood vessels and cellular elements like blood plasma. The entire mucosa is highly concentrated with blood vessels and contains large venous-like spaces; bodies which have a vein-like appearance and swell and congest in response to allergy or infection.

 

 

 

Schematic illustrations of the mucosal tissue (left) and nasal cavity anatomy (right)

 

The nasal mucosa plays an important role in regulating the immune responses to allergens and other airborne pathogens, which enter the nose. Normally, it prevents allergens and pathogens from penetrating the nasal cavity and deleterious infections or allergic reactions. Healthy intact mucus is covering the nasal cavity and provides a physical barrier against biological assaults due to its viscous and adhesive properties. Upon extensive exposure to biological assaults the mucus may fail to provide the necessary defense which results in infection or allergic reaction. For this manner, mucoadhesive polymers can contribute to a better functionality in defense from biological assaults.

 

The term ‘mucoadhesion’ refers to the adhesion of specific polymers to the surface of the mucosal layer. The mucosal layer is made up of mucus, a viscoelastic fluid, which is secreted by the epithelial cells. A mucoadhesion polymer helps to promote the adhering of a given formulation to the nasal mucosa by physically interacting with the mucosa. Various properties impact the mucoadhesive of polymers, such as: (i) molecular weight; (ii) chain length; (iii) viscosity; (iv) degree of cross-linking; (v) spatial conformation; (vi) flexibility of polymer chains; (vii) concentration; (viii) charge and degree of ionization – anion>cation>non-ionic; (ix) degree of hydration; and (x) pH.

 

The mechanism of mucoadhesion is characterized by to two steps: contact stage and consolidation stage. The first contact stage is characterized by the initial contact between the polymers and the mucous membrane, with spreading and initiating a deep contact with the mucus layer. In the second consolidation step, the polymers are activated by the presence of moisture and as they hydrate they become mucoadhesive. Our innovative technologies consist of a unique mixture of mucoadhesive polysaccharides polymers creating a 3-dimentional network structure to better interact with mucosal tissues.

 

Moreover, the highly vascularized nature of the nasal cavity enabled an alternative administration route of drugs and has gained interest among pharmaceutical companies as a means of advanced method to increase residence time in the nasal cavity.

 

Capture and Contain ^TM (“C&C”)

 

We are constantly exposed to airborne contaminations, and as we breathe, these pathogens and allergens may cause serious health issues. Our proprietary C&C is based on natural 3-D polymeric network tailored to optimally adhere to the nasal mucosal surface. The polymeric network creates a physical barrier that captures and contains biological assaults such as particulate allergen or viruses from interacting with the nasal epithelial tissue.

 

 

The C&C technology consist of mucoadhesive polymers mixture optimized for the purposes of coverage and adherence to the nasal cavity as well as capturing and containing the biological assaults based on physical interactions.

 

 

 

Our product candidate is presented in a liquid form, which allows a rapid interaction between the polymers and the mucosa and avoid the irritating effect of powdered based formulations. In addition, our product candidate is negatively charged to allow a high degree of mucoadhesivness. Moreover, its unique structure allows a high degree of capturing and containing of variable types of biological assaults. The product candidates’ pH was adjusted to further decrease the viral viability without damaging the nasal mucosal tissue.

 

The innovative formulation is expected to provide a barrier against viruses and allergens from contacting the nasal epithelial tissue for approximately six hours after each nasal administration without any adverse side effects. The potential blocking of initial colonization can reduce the viral load, which helps the immune system to better control the infection. The same concept applies for blocking allergens from interacting with epithelial tissue.

 

As a physical barrier, our lead product candidates have the potential advantages:

 

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easy to use

 

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fast acting

 

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non-irritant

 

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non-drip

 

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optimal coverage of nasal cavity

 

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up to 6h of protection after each application

 

With respect to COVID-19, the virus tends to become firmly established in the nasal cavity. Then, in some cases, the virus is aspirated into the lungs where it may cause more serious disease, including potentially fatal pneumonia. 

 

 

With respect to the COVID-19, our C&C product candidates is designed to protect the upper respiratory tract in conjunction with additional preventative measures such as vaccination, wearing masks, keeping social distance and maintaining proper hygiene to decrease the probability of serious disease.

 

 

FDA clearance plan for our C&C product candidates

  

We performed a regulatory assessment review for our PL-15 and PL-16 product candidates where the intended use includes a “nasal mechanical virus blocker”. There are no regulatory classifications or predicate devices found in the FDA’s databases matching this intended use. We believe the regulatory pathway will be considered a Class II medical device without substantial equivalence, which would require a De Novo Classification request. During the first quarter following the closing of this offering we intend to schedule an FDA Pre-submission meeting for both our PL-15 and PL-16 product candidates to discuss whether both would be considered as Class II medical device and to ensure FDA agreement with the proposed testing plan. 

 

PL-14 – Nasal Allergies

 

Our PL-14 product candidate is scheduled to initiate its preclinical safety trials in the third quarter of 2023. We expect pivotal clinical trial to commence a few months afterward, in the second quarter 2024, following which we plan to submit a 510(k) application for blocking allergens from contacting the nasal epithelial tissue to the FDA.

 

PL-15 – COVID-19

 

Our PL-15 product candidate is scheduled to undergo preclinical safety trials in the third quarter of 2023. We expect feasibility clinical trial to commence in the first quarter 2025. We expect that the pivotal clinical study to commence in the second quarter 2025, following which we plan to submit a De Novo Classification request for blocking SARS-CoV-2 from contacting the nasal epithelial tissue to the FDA.

 

PL-16 - Influenza

 

Our PL-16 product candidate is scheduled to undergo preclinical safety trials in the third quarter of 2023. We expect feasibility clinical trial to commence in the second quarter 2024. We expect pivotal clinical trial to commence in the first quarter 2025, following which we plan to submit a De Novo Classification request for blocking Influenza from contacting the nasal epithelial tissue to the FDA.

 

Study Results

 

Over the last 20 months our formulations have been tested for their efficacy to block different types of biological assaults from interacting with host cells. For this purpose, we used a validated and well accepted cultured cells in vitro blocking assays, to evaluate the potential of the formulation to block the human coronavirus 229E and Influenza H1N1 virus, as well as the house dust mite Der P1 and the timothy grass Phl P1 allergens. The studies have been conducted mainly by our service partner PharmaSeed Ltd., Israel’s largest GLP-certified pre-clinical CRDO specializing in translational and regenerative studies. The main goal of these studies was to evaluate our formulations for their potential to prevent cell mortality as a consequence of viral infection, or to decrease the anti-inflammatory cytokines secretion following allergens encounter. Together with the biological effect of the formulations, we evaluated their cytotoxicity effect using cytotoxic cells assay on variable cell lines (MRC5, MDCK and A549).

 

The viral or allergen blocking assay was performed by using specific host cells, susceptible to viral infection or allergen interaction. The host cells were treated with our formulation and challenged by viral infection or allergens. The viability of non-treated or treated cells was monitored using 3-(4,5-dimethylthiazol-2-yl)-2,5-diphenyltetrazoliumbromide (MTT) to determine the formulations’ effective concentrations.

 

 

While determinations of safety and efficacy are solely within the authority of the FDA and comparable regulatory bodies, we believe that based on the results of the aforementioned studies, our formulations presented a consistent and significant (p-value < 0.05) barrier effect, as expressed in the viral blocking assays with the preservation of 100% of cell viability compare to significantly lower cell viability of cells infected with human coronavirus 229E and Influenza H1N1 (31% and 5%, respectively). In addition, our formulation presented barrier activity against the house dust mite allergen Der P1 and the timothy grass allergen Phl P1 from interacting with the host cells. This barrier effect was expressed with the inhibition of IL-8 secretion, an important protein related to inflammation, where it plays a key role in the recruitment of neutrophils and other immune cells to the site of infection.

 

In all tested cell lines (MRC5, MDCK and A549), no significant cytotoxicity was observed when compared to the untreated cells.

 

The charts below represent six, unique studies performed to demonstrate the reduction of inflammation in various cell lines after application with our C&C product candidates polymers. Our polymers have a mass of around 100,000 Daltons, or 100,000 Da. According to the Scientific Journal of Medicine, molecules above 1,000 Da, cannot penetrate cell lines. Because our polymers have an atomic mass much higher than the upper cell penetration limit, the polymers will simply sit on top of the cells and reduce exposure to allergens and viruses, as opposed to actually penetrating the cells and causing a chemical reaction.

 

UT – Untreated cells

 

UT+A – Untreated cells challenged with allergen

 

Figure 1 - The effect of the C&C technology (PL-14) in reduction the IL-8 secretion in response to dust mite allergen Der P1. A lower bar indicates lower inflammation (lowercase letters are significantly different from each other (P< 0.05)).	Figure 2 - The effect of the C&C technology (PL-14) in reduction the IL-8 secretion in response to timothy grass allergen Phl P1. A lower bar indicates lower inflammation (lowercase letters are significantly different from each other (P< 0.05))

 

Figure 3 - The effect of the C&C technology (PL-14) in reduction the IL-8 secretion in response to European hornbeam allergen Car B1. A lower bar indicates lower inflammation (lowercase letters are significantly different from each other (P< 0.05)	Figure 4 - The effect of the C&C technology (PL-14) in reduction the IL-8 secretion in response to European dust mite allergen Der F1. A lower bar indicates lower inflammation (lowercase letters are significantly different from each other (P< 0.05))

 

 

Figure 5 - The effect of the C&C technology (PL-15) in protection of the cells against human corona virus. A higher bar indicates higher degree of protection (lowercase letters are significantly different from each other (P< 0.05))	Figure 6 - The effect of the C&C technology (PL-16) in protection of the cells against influenza virus. A higher bar indicates higher degree of protection (lowercase letters are significantly different from each other (P< 0.05))

 

Figure 7 - The effect of the C&C technology (PL-15) in protection of the cells against SARS-CoV-2 Omicron BA.1 virus. A higher bar indicates higher degree of protection (lowercase letters are significantly different from each other (P< 0.05))

 

Trap and Target ™ (T&T)

 

Novel delivery systems are required to address unmet clinical needs. In circumstances where local or systemic administration may not be the best approach, nasal drug delivery may be a viable option. Intranasal administration is an attractive option for local and systemic delivery of many therapeutic agents.

 

 

Advantages of intranasal drugs delivery

 

The nasal cavity is an important target for local and systemic drug administration as well as targeting the central nervous system. Due to highly vascularization of the nasal mucosa, liquids or particles that attach to this surface can act either locally or be absorbed into the bloodstream. To treat localized diseases including congestion, sinusitis, and allergic reactions, a variety of drugs such as corticosteroids and antihistamines often are administered to the nasal cavity. The first cranial nerve, or olfactory nerve, is the only point where the central nervous system is exposed to the body’s mucosa, and it is one of six nerves that branch into the nose cavity. This means that medications can be absorbed directly into the brain, bypassing the blood-brain barrier.

 

Although there are many advantages for delivering medicines intranasally, there are also a few drawbacks, such as quick evacuation from the nasal canal, limited bioavailability, and difficulty getting a big enough dosage due to the limited absorption area. Our T&T technology is developed to address the abovementioned drawbacks to further improve the efficiency of intranasal administration. Based on our C&C hydrogel technology, we adjusted specific characteristic parameters and established the T&T drug delivery system for intranasal targeted drugs.

 

 

 

While determinations of safety and efficacy are solely within the authority of the FDA and comparable regulatory bodies, the T&T platform delivery technology consist of a mucoadhesive polymers mixture designed to allow a long residence time and an intimate contact with the mucosal tissue for what we believe to be an effective delivery of medicines. The T&T platform can be tailored for different molecules to address their specific challenges thus believed to induce improved therapeutic effect. The T&T technology has been designed to enable mucoadhesion and prolonged retention at the deposition site by tailoring the physicochemical properties through composition, concentration and crosslinking of the key polymers of the formulation appears pivotal for the potential development as nasal medicinal product candidates.

 

The T&T platform is optimized into two main applications: local and systemic delivery.

 

 

Locally acting nasal product candidates

 

Several nasal products are present on the market for the treatment of local ailments of the nose. In general, they are nasal sprays and the principal APIs contained in such products are antihistamines, corticosteroids and vasoconstrictors.

 

Corticosteroids

 

Among the locally acting nasal products, intranasal corticosteroids, or INCS, are particularly interesting for their clinical and commercial value, being indicated as primary or adjunct therapy for treating nasal congestion, allergic/non-allergic rhinitis, acute rhinosinusitis, chronic rhinosinusitis with or without nasal polyposis and adenoid hypertrophy.

 

The efficacy and safety profiles of INCS for adults and pediatric patients is well established. The bioavailability of the CS can be increased due to the bioadhesion and viscosity of our formulations. Patents related to INCS products on the market expired recently in addition to the usage of CS as a promising treatment to COVID-19 symptoms create an opportunity for market penetration.

 

We aim to conduct feasibility studies for the corticosteroids product candidate of the T&T technology beginning in the second quarter of 2023 through the second quarter of 2024. The feasibility studies may include drug loading capacity, release kinetics profile of the APIs, stability and local toxicity. Based on these feasibility studies we will identify the leading candidates that will be further optimized to be tested in preclinical studies for safety and efficacy evaluation.

 

Systemically acting nasal product candidates

 

The high vascularization and high permeability of the nasal mucosa enabling systemic distribution of drugs. Nasal drug products on the market now include several indications such as hormone replacement therapy, osteoporosis, migraine, prostate cancer and vaccination against influenza. Because nasal administration avoids first-pass metabolism and the gastrointestinal tract, it is used for the delivery of APIs with low bioavailability, including peptides and proteins.

 

We believe that our T&T hydrogel technology can be compatible with drugs related to the central nervous system and significantly improve their bioavailability. We identify a need for improved delivery system for benzodiazepines drugs as well as for the opioid antagonist naloxone. We are currently evaluating the feasibility of these candidates in collaboration with one of the members of our Scientific Advisory Board, Prof. Fabio Sonvico (Pharmaceutical Technology, University of Parma, Italy), and will select our lead candidate to proceed to preclinical and clinical evaluations.

 

Benzodiazepines

 

Benzodiazepines, or BZDs, are widely recommended drugs in many countries around the world, as they are used to lessen anxiety, seizures, relax muscles, induce rest, or as sedatives for general anesthesia or sedation before medical procedure. Intranasal administration of benzodiazepines) is advantageous for home treatment of prolonged seizures, for pre-hospital treatment of seizures by emergency medical technicians, and for care of severely cognitively and behaviorally impaired patients when patient cooperation may be restricted.

 

We are planning to conduct feasibility studies for the BZD product candidates utilizing the T&T technology beginning in the second quarter of 2023 through the second quarter 2024. We will explore the effect of drug loading, release kinetics profile, stability, and local toxicity. Based on these feasibility studies we will identify two or three leading candidates that will be further optimized and be tested in preclinical studies for safety and efficacy. Based on the pre-clinical studies results we will proceed to conduct Phase I clinical trial.

 

 

Naloxone – an Opioid Antagonist

 

The current opioid overdose epidemic can be attributed to fentanyl and other super-potent opioids found in substantial numbers of recent overdoses. Providing Naloxone immediately after a person experiences respiratory depression can reverse opioid toxicity. It is possible to administer Naloxone by injection or intranasally. Ampoules and prefilled syringes of Naloxone injectables are available. In comparison with naloxone injectables, naloxone nasal spray provides several advantages to community usage, including ease of administration, minimal training requirements, and no risk of needlestick injuries. In the event of an overdose of opioids in the community, Naloxone nasal spray might be used for emergency rescue treatment. Patients who may witness an opioid overdose or are at risk of opioid overdose are advised to carry naloxone nasal spray for use in the event of an opioid overdose emergency.

 

We believe that the characteristic of our T&T derived formulations may provide an improved uptake profile and bioavailability of naloxone through intranasal administration due to its mucoadhesive and viscous properties. We aim to conduct feasibility studies for the naloxone product candidate of the T&T technology beginning in the second quarter of 2023 through the second quarter of 2024. The feasibility studies may include drug loading capacity, release kinetics profile of the APIs, stability and local toxicity. Based on these feasibility studies we will identify the leading candidates that will be further optimized to be tested in preclinical studies for safety and efficacy evaluation. Based on the pre-clinical study results we plan to proceed to Phase I clinical trial.

 

Our Strengths

 

We believe that our experienced results-oriented management team, promising IP portfolio, scalable robust business model and multiple product candidates validating our technologies gives us a distinct advantage in the marketplace.

 

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People:   Our leadership team has a vast industry experience. Our management team has over 15 years (on average) of experience in life science companies. Our board of directors have vast experience in the life sciences industry as well as strong financial background. We believe that the holistic knowhow of our group will strongly contribute to a successful path from clinical development, regulatory approvals and commercialization of our product candidates. In addition, our management is supported by our Scientific Advisory Board which is an advisory panel of world-renowned academics and thought leaders with expertise in drug delivery systems, Chemistry and Pharmaceuticals.

 

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Process:   We are developing and optimizing set of business processes including pre-clinical and clinical development, quality and regulatory processes. These processes can contribute shortening the time to market of our future product candidates position us with a competitive value in the competition landscape. The regulatory path for the C&C product candidates will be Class II 510 (k). With regards to the T&T platform technology development process our feasibility set of studies is well defined and accepted in the intranasal delivery industry. We focus on already approved APIs (corticosteroids, benzodiazepines and naloxone) to shorten the clinical and regulatory processes time towards 505(b)(2) approval.

 

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Adaptable Technology:   Our C&C hydrogel technology is tunable and can provide a solution against a wide range of biological assaults based on its versatile morphological properties. Our T&T drug delivery platform is designed to allow a long residence time and an intimate contact with the mucosal tissue for a targeted delivery of medicines. The T&T platform can be tailored for different drugs to address their specific challenges thus believed to induce improved therapeutic effect. Both technologies are relatively easily adjusted and can potentially provide solutions in a rapid manner to new medicinal challenges.

 

 

Market Opportunities

 

We believe that our technologies have the potential to provide solutions to a broad range of unmet needs in the healthcare market. With our C&C technology, we aim to introduce solutions to address common medical and public health challenges, such as allergic rhinitis and nasal viral infections, including COVID-19. Looking towards the future, the COVID-19 pandemic highlighted the need for action at the global level to invest in technologies, tools and solutions that will help overcome the next world health crisis. We believe our technology can play an important role in aiding nations and global organizations to combat viral outbreaks. While people across the world have become accustomed to preventative measures such as vaccination, wearing masks, keeping social distance and maintaining proper hygiene, we believe that there is an obvious need for a broader arsenal of more technologically advanced tools to help protect people as they return to normal routine.

 

With our T&T technology, we aim to address challenges in the markets of: allergic and non-allergic rhinitis by local intranasal delivery of corticosteroids; for systemic delivery of CNS related drugs for the growing markets of combatting opioid overdose using intranasal naloxone, and benzodiazepines for seizure clusters.

 

C&C Technology Market Opportunities

 

The human body is under constant external threats. Allergens, viruses and other toxins commonly penetrate our body’s defenses, first through its mucosal membranes, such as the lining of the mouth, nose, and eyes. While our immune system is typically well-equipped to fend-off or manage such threats, even common colds, influenza, and allergies continue to affect hundreds of millions of people every year.

 

Nasal gels and nasal sprays have emerged as a promising approach to block viruses and allergens from contacting the nasal epithelial tissue. Nasal spray market is expected to gain market growth in the forecast period of 2020 to 2027. Data Bridge Market Research analyses the market to account to $22.71 billion by 2027 growing at a compound annual growth rate, or CAGR, of 6.12% in the above-mentioned forecast period. The growing cases of allergic rhinitis and infections will help in driving the growth of the nasal spray market.

 

Changing lifestyle across the globe, improving patient compliance, growing geriatric population, increasing level of pollution, painless way of administrating drug will likely accelerate the growth of the nasal spray market in the forecast period of 2020-2027. On the other hand, adoption of nasal spray as an effective route of drug administration and rising demand for self-administration will further boost various opportunities that will lead to the growth of the nasal spray market in the above-mentioned forecast period.