FibroBiologics, Inc.: Form 10-Q for the period ended Mar 31, 2024

The following discussion and analysis should be read in conjunction with the unaudited financial statements and notes thereto included in Part 1, Item 1 of this Quarterly Report and with the audited Consolidated Financial Statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2023.

Overview

We are a clinical-stage cell therapy company focused on developing and commercializing fibroblast-based therapies for patients suffering from chronic diseases with significant unmet medical needs, including wound healing, multiple sclerosis, degenerative disc disease, psoriasis and certain cancers, and potential extension of life applications including thymic and splenic involution reversal. At present, our novel manufacturing process entails collecting excess tissue from surgical procedures and using the allogeneic fibroblasts to grow a cell bank for use in our procedures. Our most advanced product candidates are CybroCell™ and CYMS101.

We are in the late pre-clinical stages of developing CYWC628 as an allogeneic fibroblast cell-based therapy for wound healing. Our studies are presently focused on utilizing fibroblasts and fibroblast-derived cells to treat wounds in diabetic mice. The results of our studies to date have shown statistically significant acceleration in the rate of wound closure in comparison with both a marketed wound care product and control, and improved quality of healed wounds. For our remaining pre-clinical studies, we will investigate multiple administrations of CYWC628 on a chemically induced chronic wound NONcNZO10/LtJ mouse model, complete a dose titration study to provide information on effective dose range of CYWC628, and complete an acute and chronic toxicity study. We expect to complete these studies in the 3rd quarter of 2024. Based upon our results achieved to date and the expected timing of these additional preclinical studies, we are planning to initiate a Phase 1/2 clinical trial in Australia for treatment of diabetic foot ulcers in 2025 with results expected in the third quarter of 2025.

We are developing CYMS101 as an allogeneic fibroblast cell-based therapy to treat MS. After completing animal studies using CYMS101 (allogeneic fibroblast cells), we received approval to conduct clinical investigations in Mexico using the fibroblast cell composition for patients with MS and have completed a Phase 1 study. The study was conducted in five participants. The primary objective of the study was to assess safety, and the secondary objective was to assess efficacy. We are currently conducting further research to determine the mode of action of fibroblasts in oligodendrocyte expansion and expect to file an IND application for a Phase 2 clinical trial in MS as funding allows. We will likely seek a strategic partner to collaborate with us on the development of CYMS101 either before initiating the Phase 2 clinical trial, or after its completion, if successful, and prior to commencing with a Phase 3 clinical trial.

CybroCell™ is an allogeneic fibroblast cell-based therapy for degenerative disc disease and is being designed as an alternative method for repairing the cartilage of the intervertebral disc (or any other articular cartilage). We have completed two animal studies. The results from the studies were positive and resulted in “first in human” trial approval. We have received IND clearance from the FDA, conditional upon approval of our master cell bank, to run a Phase 1 study for patients suffering from degenerative disc disease and will be conducting this study within the United States. A timeline will be determined through discussions with the FDA and as funding allows.

We also have psoriasis, cancer, and extension of life programs in the early stages of development and we plan to accelerate such programs as funding allows.

We currently purchase our cell therapy product candidates from a CDMO. If our product candidates receive marketing approval, we will evaluate the longer-term feasibility of building our own cGMP manufacturing facility or continuing to outsource production to a CDMO for clinical testing and commercial sales.

Since our spinoff from FibroGenesis in April 2021, our operations have included business planning, hiring personnel, raising capital, building our intellectual property portfolio, and performing research and development on our product candidates and our fibroblast technology, leveraging the clinical benefits of fibroblasts as the basis of our cell therapy platform.

We have incurred net losses since inception and expect to incur losses in the future as we continue our research and development activities. To date, we have funded our operations primarily through investment from FibroGenesis, the issuance of $5.6 million of our convertible promissory notes that were issued from December 2021 through April 2022, the issuance of $18.6 million of preferred stock, and the issuance of $2.8 million of common stock.

As of March 31, 2024, we had cash and cash equivalents of approximately $8.2 million. Since our inception, we have incurred significant operating losses. We incurred net losses of approximately $8.5 million and $2.4 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of approximately $32.8 million. We expect to continue to incur significant expenses and operating losses for the next several years. See “—Funding Requirements” below.

We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase substantially if and as we:

• advance the development of our lead product candidates through clinical development, and, if approved by the FDA, commercialization;
• advance our preclinical development programs into clinical development;
• incur manufacturing costs for cell production to supply our product candidates;
• seek regulatory approvals for any of our product candidates that successfully complete clinical trials;
• increase our research and development activities to identify and develop new product candidates;
• hire additional personnel;
• expand our operational, financial and management systems;
• meet the requirements and demands of being a public company;
• invest in further development to protect and expand our intellectual property;
• establish a sales, marketing, medical affairs, and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval and intend to commercialize; and
• expand our manufacturing and develop our commercialization efforts.

Due to the numerous risks and uncertainties associated with biopharmaceutical product development and the economic and developmental uncertainty, we may be unable to accurately predict the timing or magnitude of all expenses. Our ability to ultimately generate revenue to achieve profitability will depend heavily on the development, approval, and subsequent commercialization of our product candidates. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As a result, we will need substantial additional funding to support our long-term continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. We may not be able to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we will have to significantly delay, reduce or eliminate the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions.

General Trends and Outlook

Recent Developments

CYWC628 for Wound Healing

For our Phase 5 pre-clinical study, using a diabetic mouse model (BKS.Cg-Dock7m), we studied the impact of multiple administrations of CYWC628 spheroids and Grafix™ on a chemically induced chronic wound often used to mimic diabetic foot ulcers in animal models. The CYWC628 spheroids were administered on Day 0, Day 4, Day 8 and Day 12. The results of our study with this mouse model of a chronic wound indicated (i) a 34.8% reduction in wound area four days after the first administration (day 4) of CYWC628 as compared to 28.6 % for Grafix™ (p > 0.05), which was not statistically significant, and 10.2% for the untreated saline control group (p < 0.05); (ii) a 43.4% reduction in wound area four days after the second administration (day 8) of CYWC628 as compared to 37.6 % for Grafix™ (p > 0.05), which was not statistically significant, and 21.7% for the untreated saline control group (p < 0.05); (iii) a 69.3% reduction in wound area four days after the third administration (day 12) of CYWC628 as compared to 47.13% for Grafix™ (p < 0.05), which was statistically significant, and 36.4% for the untreated saline control group (p < 0.05), which was also statistically significant.; and (iv) an 83.8% reduction in wound area four days after the fourth administration (Day 19) of CYWC628 as compared to 66% for Grafix™ (p< 0.05), which was statistically significant, and 55.2% for the untreated saline control group (p<0.01), which was also statistically significant. Grafix™ results as compared to saline control were not statistically significant at any of the measured timepoints, whereas CYWC628 as compared to saline control was statistically significant at all measured timepoints.

The following graph and chart summarize the results of our Phase 5 pre-clinical study.

Effective wound healing is not only determined by the efficiency of wound closure, but also by the quality of the healed wound. For our multiple CYWC628 administration study, we also looked at several metrics essential to the quality of wound healing. These metrics are re-epithelialization, granulation, cell proliferation, neo-vascularization, and fibroblast recruitment. The results of the study indicated that at day 19 after the final treatment, CYWC628 had a significantly improved epithelization, granulation, cell proliferation (as measured using Ki67), neo-vascularization (as measured by CD31 and VEGF), and fibroblast recruitment (as measured by αSMA and IL-6) compared to control and Grafix™.

Manufacturing

We are planning to complete a technology transfer of our cell manufacturing processes to a contract development and manufacturing organization, or CDMO, and conduct feasibility studies for our fibroblast spheroid-based drug product, with the intent to enter into a master services agreement with that CDMO to supply drug product for clinical trials. We expect to produce a master cell bank, working cell bank, and drug product for use in clinical trials by year end 2024.

Components of Results of Operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for any of our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. We cannot predict if, when or to what extent we will generate revenue from the commercialization and sale of any of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.

Research and Development Expenses

Our research and development expenses consist of expenses incurred in connection with the development of our product candidates and include:

• employee-related expenses, which include salaries, benefits, travel and stock-based compensation for our research and development personnel;
• laboratory equipment and supplies;
• direct third-party costs such as expenses incurred under agreements with CROs and CMOs;
• consultants that conduct research and development activities on our behalf;
• costs associated with conducting preclinical studies and clinical trials;
• costs associated with technology; and
• facilities and other allocated expenses, which include expenses for rent and other facility related costs and other supplies.

We expense research and development costs as incurred. Nonrefundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates as they advance into later stages of clinical development and our other product candidates in preclinical development as they advance into clinical development. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates. This is due to the numerous risks and uncertainties associated with developing product candidates, including uncertainty related to:

• the duration, costs and timing of clinical trials for our current development programs and any further clinical trials related to new product candidates;
• the sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials;
• the acceptance of IND applications for future clinical trials;
• the successful and timely enrollment and completion of clinical trials;
• the successful completion of preclinical studies and clinical trials;
• successful data from our clinical program that supports an acceptable risk-benefit profile of our product candidates in the intended populations;
• the receipt and maintenance of regulatory and marketing approvals from applicable regulatory authorities;
• establishing agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if any of our product candidates are approved;
• the entry into collaborations to further the development of our product candidates;
• obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; and
• successfully launching our product candidates and achieving commercial sales, if and when approved.

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A change in the outcome of any of these variables with respect to the development of any of our programs or any product candidate we develop would significantly change the costs, timing and viability associated with the development and/or regulatory approval of such programs or product candidates.

General, Administrative and Other Expenses

Our general, administrative, and other expenses consist primarily of personnel costs, allocated facilities costs, and other expenses for outside professional services, including legal, marketing, investor relations, human resources services, and accounting services. Personnel costs consist of salaries, benefits, and stock-based compensation for our general and administrative personnel. We will incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services. We also expect to increase the size of our administrative function to support the growth of our business.

Interest Expense

Our interest expense consists primarily of accrued interest expense and amortization of discount on our convertible notes.

Statements of Operations

Results of Operations

Comparison of Three Months Ended March 31, 2024 and 2023

The following table sets forth our results of operations for the three months ended March 31, 2024 and 2023.

(unaudited, in thousands)

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Research and Development Expenses

Research and development expenses were $1.0 million and $0.5 million for the three months ended March 31, 2024 and 2023, respectively. The increase of $0.5 million was primarily due to:

• increased personnel related expenses of $0.2 million due to hiring two additional research scientists after the three months ended March 31, 2023;
• increased research materials and supplies, conferences, and depreciation expenses of $0.2 million due to increased laboratory personnel and preclinical studies; and
• increased tissue acquisition costs of $0.1 million.

Research and development expenses are not tracked by product candidate.

General, Administrative and Other Expenses

General, administrative and other expenses were $2.5 million and $1.8 million for the three months ended March 31, 2024 and 2023, respectively. The increase of $0.7 million was primarily due to:

• increased expenses of $0.8 million for regulatory, legal, accounting, insurance, and marketing expenses related to our direct listing completed in January 2024;
• increased expenses of $0.2 million for added personnel in 2024;
• decreased expenses of $0.3 million due to timing of an executive bonus in January 2023.

Change in fair value of liability instrument

Change in fair value of liability instrument was $3.1 million and none for the three months ended March 31, 2024 and 2023, respectively. The liability instrument to investors under the Share Purchase Agreement among us, GEM Global Yield LLC SCS, or GEM, and GEM Yield Bahamas Limited, or GYBL, dated November 12, 2021, or the GEM SPA, was comprised of the contingent warrant liability and contingent put option. The $3.1 million loss during the three months ended March 31, 2024 resulted from the mark to market of the warrant liability, which will occur at the end of each reporting period as long as the warrants are outstanding and classified as a liability.

Commitment fee expense

Commitment fee expense was $1.9 million and none for the three months ended March 31, 2024 and 2023, respectively. A $2 million commitment fee pursuant to the GEM SPA became payable to GEM upon completion of the Direct Listing in January 2024. The commitment fee is payable to GEM as drawdown notices are issued, with any remaining balance payable one year after public listing. We sold $3.0 million of common stock to GEM under the GEM SPA during the three months ended March 31, 2024, which made approximately $0.1 million of the commitment fee payable immediately. This $0.1 million portion of the commitment fee was netted against the proceeds received in additional paid-in capital. The remaining $1.9 million was expensed immediately because we are planning to raise funds through other sources and have no plans to issue further draw downs to GEM prior to the one-year anniversary of our public listing when this remaining amount will be due.

Other loss

Other loss is comprised of the payments to FibroGenesis in excess of the derivative liability established at inception of the Agreement Regarding Right of First Negotiation entered into by us and FibroGenesis in January 2023, or the ROFN Agreement.

Interest income

Interest income is comprised of interest income and unrealized gain/losses on cash equivalents.

Interest Expense

Interest expense was $0.0 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively. The decrease of $0.1 million was due to the maturities and conversions of the notes during the year ended December 31, 2023. Interest expense was recorded in 2023 for the nominal interest rate of 6.0% plus the amortization of the discount on the 2022 convertible notes.

Income Taxes

The effective income tax rate was 0.0% for all periods. Currently, we have recorded a full valuation allowance against our net deferred tax assets.

Liquidity and Capital Resources

Overview

To date, we have financed our operations primarily with investment from FibroGenesis, proceeds from borrowings under our convertible loan agreements, and proceeds from the issuance of preferred stock and common stock. From inception through March 31, 2024, we have received net proceeds of approximately $5.6 million from sales of our convertible notes, $18.6 million from the issuance of preferred stock, and $2.8 million from the issuance of common stock. As of March 31, 2024, we had cash and cash equivalents of approximately $8.2 million and an accumulated deficit of approximately $32.8 million. As of March 31, 2024, we had no outstanding debt.

Cash Flows

The following table sets forth a summary of our cash flows for the three months ended March 31, 2024 and 2023.

(in thousands)

Cash Flows from Operating Activities

Net cash used in operating activities was $4.3 million and $2.0 million for the three months ended March 31, 2024 and 2023, respectively, and consisted primarily of net losses of $8.5 million and $2.4 million, respectively. Noncash expenses of change in fair value of liability instrument of $3.1 million, change in commitment fee payable of $2.0 million, stock-based compensation expense of $0.5 million, and amortization of operating lease right-of-use asset of $0.1 million partially offset the net loss, while an increase in prepaid expenses of $0.7 million, a decrease in accounts payable and accrued expenses of $0.6 million, a decrease in payable to Parent of $0.1 million, and a decrease in operating lease liability of $0.1 million added to the cash used in operations in the three months ended March 31, 2024. Noncash expenses of stock-based compensation of $0.4 million, amortization of operating lease right-of-use asset of $0.1 million, and amortization of convertible notes debt discount of $0.1 million, and an increase in accounts payable and accrued expenses of $0.2 million partially offset the net loss, while an increase in other current assets of $0.1 million and a decrease in operating lease liability of $0.1 million added to the cash used in operations in the three months ended March 31, 2024.

Cash Flows from Investing Activities

Net cash used in investing activities was approximately $0.0 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively. The decrease was due to the timing of laboratory equipment purchases.

Cash Flows from Financing Activities

Net cash provided by financing activities was approximately $3.3 million and $14.6 million for the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024, we entered into a $0.6 million short-term borrowing agreement to finance the D&O insurance policy premiums and repaid $0.1 million of the principal borrowed, and we raised $2.8 million of net proceeds from the sale of common stock under the GEM SPA. During the three months ended March 31, 2023, we paid to FibroGenesis $0.3 million under the ROFN Agreement, and we received $14.9 million in total net proceeds from the issuance of Series B Preferred Stock and Series B-1 Preferred Stock.

Funding Requirements

We do not have any products approved for sale, and we have never generated any revenue from contracts with customers. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our current or future product candidates and we do not know when, or if, that will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our current and future product candidates, and begin to commercialize any approved products. We are subject to all the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. Moreover, we will incur additional costs associated with operating as a public company.

The financial statements have been prepared as though we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have incurred operating losses and negative cash flows from operations since inception. As of March 31, 2024, we had an accumulated deficit of approximately $32.8 million. Management expects to continue to incur operating losses and negative cash flows.

These factors raise substantial doubt about our ability to continue as a going concern for one year from the issuance of the financial statements. Our ability to continue as a going concern is dependent on the Company’s ability to raise additional capital. We will need to raise additional capital to continue to fund our operations. We believe we will be able to obtain additional capital through equity financings or other arrangements to fund operations; however, there can be no assurance that such additional financing, if available, can be obtained on acceptable terms. If we are unable to obtain such additional financing, future operations would need to be scaled back or discontinued.

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

• the initiation, progress, timeline, cost and results of our clinical trials for our product candidates;
• the initiation, progress, timeline, cost and results of additional research and preclinical studies related to pipeline development and other research programs we initiate in the future;
• the cost and timing of manufacturing activities, including our planned manufacturing scale-up activities associated with our product candidates and other programs as we advance them through preclinical and clinical development through commercialization;
• the potential expansion of our current development programs to seek new indications;
• the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;
• the cost of filing, prosecuting, defending, and enforcing patent claims and other intellectual property rights, in-licensed or otherwise;

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• the effect of competing technological and market developments;
• the payment of licensing fees, potential royalty payments and potential milestone payments;
• the cost of general operating expenses;
• the cost of establishing sales, marketing, and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own; and
• the costs of operating as a public company.

Further, our operating plan may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development expenditures.

If we need to raise additional capital to fund our operations, funding may not be available to us on acceptable terms, or at all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our preclinical studies, clinical trials, research and development programs or commercialization efforts. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, and other licensing arrangements. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us.

Contractual Obligations and Commitments

Material contractual obligations arising in the normal course of business primarily consist of operating leases. Future minimum lease payments under non-cancellable leases as of March 31, 2024, were approximately $1.9 million, of which $0.5 million is due within one year. We generally expect to satisfy these commitments with cash on hand and cash provided by financing activities.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with GAAP, we evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We define our critical accounting estimates as those under GAAP that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. For a description of our critical accounting policies and estimates, please see the disclosures in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023. There have not been any material changes to our critical accounting policies and estimates since December 31, 2023.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are not required to provide the information specified under this item.

We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a–15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Evaluation of Disclosure Controls and Procedures

We have carried out an evaluation, under the supervision, and with the participation, of management, including our chief executive officer and chief financial officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e)) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10–Q. During the preparation of our financial statements for the fiscal year ended December 31, 2023, our management identified a material weakness in our internal control over financial reporting due to a lack of segregation of duties. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Specifically, our management identified a material weakness in our internal controls within the financial reporting function that resulted from an ineffective design and implementation of controls over proper segregation of duties for the period of time covered by our financial statements due to a limited number of individuals. Based upon such evaluation, and due to the material weakness identified, our principal executive officer and principal financial and accounting officer have concluded that our disclosure controls and procedures were not effective.

Remediation Plan for Material Weakness

We will continue to add staff, evaluate segregation of duties, and implement initiatives to improve our internal controls over financial reporting as we grow.

Changes in Internal Control over Financial Reporting

There has been no change in the Company’s internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) that occurred during the three months ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within an organization have been detected. Accordingly, our disclosure controls and procedures and our internal control over financial reporting are designed to provide reasonable, not absolute, assurance that the objectives of the control system are met. We continue to implement, improve, and refine our disclosure controls and procedures and our internal control over financial reporting.

Our business is subject to risks, uncertainties, and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. Except as set forth below, there have been no material changes from the risk factors previously described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 29, 2024.

Risks Related to Our Financial Condition and Capital Requirements

There is substantial doubt about our ability to continue as a going concern.

In connection with the preparation of this Quarterly Report, our management concluded that there is substantial doubt as to whether we can continue as a going concern for the twelve months following the issuance of this Quarterly Report. Our ability to continue as a going concern is dependent upon raising capital to maintain current operations and continue research and development efforts. We plan to raise additional capital to fund our operations through public or private equity offerings, debt financings, and/or potential collaborations and license arrangements or other sources. There is no assurance, however, that any additional financing or any revenue-generating collaboration will be available when needed or that we will be able to obtain financing or enter into a collaboration on terms acceptable to us.

These factors raise substantial doubt about our ability to continue as a going concern. Substantial doubt about our ability to continue as a going concern may materially and adversely affect the price per share of our common stock, and it may be more difficult for us to obtain financing. If existing or potential collaborators decline to do business with us or potential investors decline to participate in any future financings due to such concerns, our ability to increase our cash position may be limited. The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations. We have prepared our condensed consolidated financial statements on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Our condensed consolidated financial statements included in this Quarterly Report do not include any adjustments that might be necessary if we are unable to continue as a going concern. If we are unable to continue as a going concern, we will be forced to delay, reduce or discontinue our research and development programs or consider other various strategic alternatives and you could lose all or part of your investment in us.