Processa Pharmaceuticals, Inc.: Form 10-Q for the period ended Jun 30, 2026

Forward Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” that reflect, when made, the Company’s expectations or beliefs concerning future events that involve risks and uncertainties. Forward-looking statements frequently are identified by the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “will be,” “will continue,” “will likely result,” or other similar words and phrases. Similarly, statements herein that describe the Company’s objectives, plans or goals also are forward-looking statements. Actual results could differ materially from those projected, implied or anticipated by the Company’s forward-looking statements. Some of the factors that could cause actual results to differ include: our limited cash and history of losses; our ability to achieve profitability; our ability to obtain adequate financing to fund our business operations in the future; our ability to secure required FDA or other governmental approvals for our product candidates and the breadth of the indication sought; the impact of competitive or alternative products, technologies and pricing; whether we are successful in developing and commercializing our technology, including through licensing; the adequacy of protections afforded to us and/or our licensors by the anticipated patents that we own or license and the cost to us of maintaining, enforcing and defending those patents; our and our licensors’ ability to protect non-patented intellectual property rights; our exposure to and ability to defend third-party claims and challenges to our and our licensors’ anticipated patents and other intellectual property rights; our ability to remain listed on the Nasdaq Capital Market; and our ability to continue as a going concern. For a discussion of these and all other known risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” herein and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, which is available on the SEC’s website at www.sec.gov (http://www.sec.gov). All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update this Quarterly Report on Form 10-Q to reflect events or circumstances after the date hereof.

References to the “Company,” “we,” “us” or “our” refer to the operations of Processa Pharmaceuticals, Inc. and its direct and indirect subsidiaries for the periods described herein.

Overview

We are a clinical-stage biotechnology company. In July 2026, we acquired Vidya Therapeutics, Inc. (“Vidya”), a clinical-stage biotechnology company developing VT-7208, a Bruton’s tyrosine kinase (“BTK”) inhibitor therapy for immune-mediated diseases with an initial focus on food allergy, chronic spontaneous urticaria (“CSU”) and relapsing multiple sclerosis (“RMS”). We are also continuing the development of our legacy pharmaceutical assets, including PCS499, PCS12852 and PCS11T, while evaluating strategic opportunities designed to maximize their clinical and long-term value.

Recent Developments

Vidya Acquisition

On July 28, 2026, we acquired Vidya, which brought Vidya’s lead asset VT-7208 into our pipeline. In connection with our acquisition of Vidya, we received $200 million in gross proceeds from a private placement financing of shares of our non-voting convertible preferred stock. We intend to use the net proceeds of $183.3 million from the private placement to fund operations into the second half of 2029 and through key clinical milestones, including top-line data from Phase 2 proof-of-concept studies for food allergy, CSU and RMS.

Elion Settlement Agreement

On July 23, 2026, we entered into a settlement agreement with Elion Oncology, Inc. (“Elion”) to resolve all claims arising from the parties’ litigation concerning the license agreement dated August 23, 2020, relating to the commercialization of PCS6422 (the “Elion License Agreement”). Under the settlement agreement, the Elion License Agreement was terminated, the PCS6422 program was returned to Elion, and the parties exchanged mutual releases of all claims relating to the Elion License Agreement, the PCS6422 program, and the related litigation.

In connection with the settlement, we paid Elion $650,000 toward its attorneys’ fees and other out-of-pocket costs. We also agreed to grant Elion a non-voting equity interest equal to 7.5% of the fully diluted pre-money equity capitalization of any newly formed entity whose assets include one or more of PCS499, PCS12852, or PCS11T, provided that the formation or spin-out of such entity is completed within 365 days after the effective date of the settlement agreement.

As a result of the settlement and the return of the PCS6422 program to Elion, we are closing our ongoing Phase 2 clinical trial of PCS6422 in advanced or metastatic breast cancer. On August 7, 2026, the stipulation of dismissal became effective, resulting in the dismissal of the litigation with prejudice.

Other 2026 Fundraising

On February 17, 2026 where we sold 86,956 shares of our common stock to an accredited investor in a private placement transaction for $200,000. During the six months ended June 30, 2026, certain directors, officers, and employees purchased 82,205 shares of common stock for approximately $207,000. In April 2026, we also sold 50,330 shares of common stock under our ATM Offering for approximately $153,000 in net proceeds. Concurrent with the acquisition of Vidya, we entered into a definitive agreement for a private placement financing to raise approximately $200 million in gross proceeds, which we expect to use to support the advancement of VT-7208 through multiple clinical milestones, including data from a Phase 2 proof-of-concept study in food allergy anticipated in the second half of 2027, data from a Phase 2 proof-of-concept study in CSU anticipated in the first half of 2028, and data from a Phase 2 proof-of-concept study in RMS anticipated in the second half of 2028.

Our Drug Pipeline

In addition to advancing the clinical-stage BTK inhibitor program in multiple indications, we continue to evaluate the development of our other legacy pharmaceutical assets PCS499, PCS12852, and PCS11T, including strategic opportunities designed to maximize the clinical and long-term value of all assets.

Results of Operations

Comparison of the three and six months ended June 30, 2026 and 2025

The following table summarizes our net loss during the periods indicated:

Revenues

We do not currently have any revenue under contract or any immediate sales prospects.

Research and Development Expenses

Our research and development costs are expensed as incurred. Research and development expenses include (i) program and testing related expenses including external consulting and professional fees related to the product testing and our development activities and (ii) internal research and development staff salaries and other payroll costs including stock-based compensation, payroll taxes and employee benefits.

Costs for the three and six months ended June 30, 2026 and 2025 were as follows:

The decrease in research and development expenses was primarily due to a decrease in preclinical, clinical trial, and other costs related to our NGC-Cap Phase 2 trial during the three and six months ended June 30, 2026 when compared to the same period in 2025. During the six months ended June 30, 2026, we placed the study on hold while performing our interim analysis.

The funding necessary to bring a drug candidate to market is subject to numerous uncertainties. Once a drug candidate is identified, the further development of that drug candidate may be halted or abandoned at any time due to a number of factors. These factors include, but are not limited to, funding constraints, safety or a change in market demand. For each of our drug candidate programs, we periodically assess the scientific progress and merits of the programs to determine if continued research and development is economically viable. Some programs may be terminated due to the lack of scientific progress and lack of prospects for ultimate commercialization.

Our clinical trial cost accruals are based on estimates of patient enrollment and related costs at clinical investigator sites, as well as estimates for the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials on our behalf.

We estimate preclinical and clinical trial expenses based on the services performed, pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on our behalf. In accruing service fees, we estimate the time period over which services will be performed and the level of patient enrollment and activity expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses and expensed when the services are rendered.

General and Administrative Expenses

Our general and administrative expenses for the three months ended June 30, 2026 increased by approximately $183,000 to $1.7 million from $1.5 million for the three months ended June 30, 2025. This increase was due primarily to increases in professional fees of approximately $179,000; insurance expense of approximately $58,000; franchise tax expense of approximately $50,000; salaries and payroll-related expenses of $34,000; and other miscellaneous office expenses of $4,000. The increases were offset by decreases in employee stock-based expenses of $74,000; rent expense of $22,000; office and other miscellaneous expenses of $20,000; repairs and maintenance expense of $12,000; and travel expenses of $11,000. We received approximately $3,000 more in reimbursements from CorLyst during the three months ended June 30, 2026 when compared to the same period in 2025.

Our general and administrative expenses for the six months ended June 30, 2026 increased by approximately $446,000 to $3.2 million from $2.8 million for the six months ended June 30, 2025. This increase was due primarily to increases in professional fees of approximately $405,000; insurance expense of approximately $144,000; salaries and payroll-related expenses of $94,000; travel expenses of $22,000; and franchise tax expense of approximately $15,000. The increases were offset by decreases in employee stock-based expenses of $144,000; rent expense of $46,000; office and other miscellaneous expenses of $42,000; and repairs and maintenance expense of $12,000. We received approximately $10,000 less in reimbursements from CorLyst during the six months ended June 30, 2026 when compared to the same period in 2025.

Other Income/Expense

Other income/expense for the three and six months ended June 30, 2026 and 2025 were as follows:

Income Tax Benefit

We did not recognize any income tax benefit for the three and six months ended June 30, 2026 or 2025.

Cash Flows

The following table sets forth our sources and uses of cash and cash equivalents for the six months ended June 30, 2026 and 2025:

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Net cash used in operating activities

We used net cash in our operating activities of $5.6 million and $5.0 million during the six months ended June 30, 2026 and 2025, respectively. The increase in cash used in operating activities during the first half of 2026 compared to the same period in 2025 was primarily related to the increased professional/consulting fees, insurance, payroll, and travel related expenses incurred.

As we advance VT-7208 through three Phase 2 proof-of-concept studies, and evaluate the legacy product candidates in our portfolio, we anticipate our research and development efforts and ongoing general and administrative costs will continue to generate negative cash flows from operating activities for the foreseeable future. We anticipate our clinical trial costs will increase in the second half of 2026 when compared to prior periods as we initiate Phase 2 studies of VT-7208 in food allergy and chronic spontaneous urticaria, since activities in 2025 were primarily related to the completion of our Phase 1B trial and setup of our NGC-Cap Phase 2 trial.

Net cash used in investing activities

We used $500,000 in investing activities to purchase digital assets and received $186,000 for the sale of digital assets during the six months ended June 30, 2026. We did not use any cash in investing activities during the same period in 2025.

Net cash provided by financing activities

During the six months ended June 30, 2026, we sold 219,491 shares of our common stock to an accredited investor, and certain directors, officers, and employees for cumulative net proceeds of $560,270. We used cash classified as financing activities of $320 to pay income taxes owed on stock-based compensation.

During the six months ended June 30, 2025, we sold 613,639 shares of our common stock, pre-funded warrants to purchase up to 828,388 shares of our common stock, accompanying Series A Warrants to purchase up to 322,027 shares of our common stock and Series B Warrants to purchase up to 161,014 shares of our common stock, and common accompanying warrants to purchase up to 1,120,000 shares of common stock for net proceeds of $10.7 million. We also received $100,000 from the exercise of warrants to purchase 16,000 shares of common stock. We also used cash classified as financing activities of $10,000 to pay income taxes owed on stock-based compensation, and $3,000 for payments owed under a financing lease obligation.

Liquidity

Following our acquisition of Vidya and closing of the related $200 million gross private placement (from which we received net proceeds of $183.3 million) on July 30, 2026, we believe our cash and cash equivalents will be sufficient to satisfy our cash requirements over the next 12 months and beyond. This represents a material change from what we reported in our 2025 Form 10-K that disclosed substantial doubt of our ability to continue as a going concern.

We have incurred losses since inception, currently devoting substantially all our efforts toward research and development of our product candidates, including conducting clinical trials and providing general and administrative support for these operations, and have an accumulated deficit of $107.4 million at June 30, 2026. During the six months ended June 30, 2026, we generated a net loss of $6.6 million. To date, none of our drug candidates have been approved for sale, and therefore we have not generated any product revenue and do not expect positive cash flow from operations in the foreseeable future. We will continue to be dependent upon equity and/or debt financing until we are able to generate positive cash flows from its operations.

We plan to raise additional funds in the future through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements, but will only do so if the terms are acceptable to us. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend our current or planned future clinical trial plans, or research and development programs. This may also cause us to not meet obligations contained in certain of our license agreements and put these assets at risk. To the extent that 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 valuable rights to our product candidates, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. 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 or making capital expenditures. There can be no assurance that future funding will be available when needed.

Contractual Obligations and Commitments

During the six months ended June 30, 2026, there have been no significant changes to the contractual obligations reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Off Balance Sheet Arrangements

At June 30, 2026, we did not have any off-balance sheet arrangements.

Critical Accounting Policies and Use of Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.

We believe that the estimates, assumptions and judgments involved in the accounting policies described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our most recent Annual Report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Actual results could differ from the estimates we use in applying our critical accounting policies. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

During the six months ended June 30, 2026, there have been no changes in our critical accounting policies from those included in our most recent Annual Report on Form 10-K.

Recently Issued Accounting Pronouncements

We have evaluated recently issued accounting pronouncements and determined that there is no material impact on our financial position or results of operations.

At June 30, 2026, management, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the evaluation of its disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at June 30, 2026 to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our 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 their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

Subsequent to the quarter ended June 30, 2026, we completed the Vidya Acquisition. In connection with the Vidya Acquisition, we have begun the process of integrating Vidya’s financial processes, systems, and personnel into our system of internal control over financial reporting. We expect this integration to continue through the remainder of 2026 and to result in changes to our internal control over financial reporting.

Risks Related to the Vidya Acquisition

Our business is highly dependent on the success of VT-7208. VT-7208 will require additional clinical and manufacturing development before we may be able to seek regulatory approval for and launch a product commercially and we may not be successful in our efforts.

We currently have no products that are approved for commercial sale and may never be able to develop marketable products. Following the Vidya Acquisition, we are focusing the majority of our resources on the development of VT-7208 in food allergy, CSU and RMS and continuing the development of our legacy pharmaceutical assets, including PCS499, PCS12852 and PCS11T, while evaluating strategic opportunities designed to maximize their clinical and long-term value. If VT-7208, across the various target indications, encounters safety or efficacy problems, development delays, regulatory issues or other problems, our development plans and forecasted timelines and business could be significantly harmed. Because we are focusing the vast majority of our resources on a single product candidate, any failure or significant delay in VT-7208’s development would have a disproportionate impact on our business, financial condition and prospects, and our other clinical-stage programs would not be able to offset such a setback.

We cannot provide you with any assurance that we will be able to successfully advance VT-7208 or any additional product candidates through the development process in any particular target indication. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development or commercialization for many reasons, including the following:

• our product candidates may not succeed in preclinical or clinical testing;
• a product candidate may on further study be shown to have harmful side effects, or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;
• competitors may develop alternatives that render our product candidates obsolete or less attractive;
• product candidates we develop may nevertheless be covered by third parties’ patents or other exclusive rights;
• the market for a product candidate may change during our development program so that the continued development of that product candidate is no longer reasonable;
• a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and
• a product candidate may not be accepted as safe and/or effective by the U.S. Food and Drug Administration, and/or other applicable regulatory authorities, patients, the medical community and/or third-party payors, if applicable.

If any of these events occur, we may be forced to abandon our development efforts for a program or programs, or we may not be able to identify, discover, develop, or commercialize additional product candidates, which could have a material adverse effect on our business and could potentially cause us to cease operations.

If we do not successfully develop, secure regulatory approval for, and commercialize product candidates or collaborate with others to do so, we will not be able to obtain product revenue in future periods, which would significantly harm our financial position and adversely affect the trading price of our common stock.

Pursuant to the terms of the Vidya Acquisition, we are required to recommend that our stockholders approve the conversion of all outstanding shares of our Series A Preferred Stock into shares of our common stock. We cannot guarantee that our stockholders will approve this matter, and if they fail to do so we may be required to settle such shares in cash and our operations may be materially harmed.

Under the terms of the Merger Agreement and the Purchase Agreement, as promptly as practicable following the date of the Merger Agreement and pursuant to the Nasdaq Stock Market Rules, we will call and hold a meeting of our stockholders to obtain the requisite approval from our legacy stockholders for, among other things, (i) the approval, in accordance with the applicable rules of Nasdaq, of the conversion of the Series A Preferred Stock into shares of our common stock, or the Preferred Stock Conversion Proposal, (ii) the approval of a 2026 Equity Incentive Plan, subject to approval by the Board, (iii) the approval of a 2026 Employee Stock Purchase Plan, and (iv) to the extent deemed necessary or advisable by us and/or Vidya, approval of an amendment to our certificate of incorporation to effect a reverse stock split (the matters contemplated in items (i) through (iv) collectively, the “Stockholder Matters”). If we fail to receive sufficient proxies to constitute a quorum or to obtain the required vote on the Stockholder Matters, we would be required to adjourn the meeting one or more times for up to 30 days per adjournment. If stockholder approval of the Stockholder Matters is still not obtained following such adjournment(s), we will be obligated to continue soliciting stockholder approval at subsequent annual or special meetings of our stockholders, held at intervals of no more than six months, until such approvals are obtained, which would be time consuming and costly.

There can be no assurance that our legacy stockholders will approve the Stockholder Matters. Additionally, if at any time following the date that is six months following the initial issuance date of the Series A Preferred Stock, we fail to deliver to the holders of the Series A Preferred Stock shares of common stock underlying such shares of Series A Preferred Stock, (other than in certain circumstances set forth in the Certificate of Designation, as defined below) the holders of the Series A Preferred Stock would be entitled to require us to settle such undelivered shares for cash in an amount equal to the fair value of such undelivered shares of common stock at such time, as described in the Certificate of Designation of Preferences, Rights and Limitations of the Series A Preferred Stock, or the Certificate of Designation. If we are forced to cash settle a significant amount of the shares of our common stock underlying the Series A Preferred Stock, it could materially affect our results of operations, business and financial condition.

There is no guarantee that the Vidya Acquisition will increase stockholder value.

In July 2026, we consummated the Vidya Acquisition, pursuant to which we acquired Vidya, and we closed the 2026 Private Placement. We cannot guarantee that implementing the Vidya Acquisition and related transactions will not impair stockholder value or otherwise adversely affect our business. The Vidya Acquisition poses significant integration challenges between our businesses and employees which could result in management and business disruptions, any of which could harm our results of operation, business prospects, and impair the value of the Vidya Acquisition to our stockholders.

The failure to successfully integrate the businesses of our company and Vidya in the expected timeframe could adversely affect our results of operations, financial condition, and future results.

Our ability to successfully integrate the operations of our company and Vidya will depend, in part, on our ability to realize the anticipated benefits from the Vidya Acquisition. If we are not able to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits of the Vidya Acquisition may not be realized fully, or at all, or may take longer to realize than expected, and the value of our common stock may be adversely affected. In addition, the integration of our company’s and Vidya’s respective businesses will be a time-consuming and expensive process. Proper planning and effective and timely implementation will be critical to avoid any significant disruption to our operations. There can be no assurance that we will effectively manage the increased complexity of our business without experiencing operating inefficiencies or control deficiencies. Delays encountered in the integration process could have a material adverse effect on our expenses, operating results and financial condition, including the value of shares of our common stock.

We expect to incur substantial expenses related to the integration of Vidya.

We have incurred, and expect to continue to incur, substantial expenses in connection with the Vidya Acquisition and the integration of Vidya. There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated, including accounting and finance, billing, payroll, and benefits. Both our company and Vidya have incurred significant transaction expenses in connection with the drafting and negotiation of the Merger Agreement, and the related ancillary agreements. While we have assumed that a certain level of expenses will be incurred, there are many factors beyond our control that could affect the total amount or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. These integration expenses likely will result in our taking significant charges against earnings following the completion of the Vidya Acquisition, and the amount and timing of such charges are uncertain at present.

A substantial number of shares of our common stock will become available for sale and may be sold upon conversion of our Series A Preferred Stock, and additional shares may be sold by existing common stockholders, which could cause the price of our common stock to decline.

If stockholders approve the Preferred Stock Conversion Proposal, the up to 307,063,330 shares of our common stock issuable upon conversion of the Series A Preferred Stock issued in connection with the Vidya Acquisition and the 2026 Private Placement, subject to beneficial ownership limitations, will represent approximately 99.0% of the issued and outstanding shares of our common stock as of August 7, 2026, on an as-converted basis. The sale of a substantial number of shares of our securities in the public market, or the perception that such sales may occur, could adversely affect the price of our common stock on Nasdaq. We cannot predict the effect, if any, that market sales of those shares of common stock or the availability of those shares of common stock for sale will have on the market price of our common stock.

In addition, in the future, we may also issue shares of our common stock in connection with investments or acquisitions. The amount of shares of our common stock issued in connection with an investment or acquisition could substantially increase our shares of common stock outstanding, which could adversely affect the price of our common stock on Nasdaq.

Concurrently and in connection with the execution of the Merger Agreement, certain officers, directors and stockholders of Vidya, and the directors and officers of the Company as of immediately following the Vidya Acquisition entered into lock-up agreements with the Company, pursuant to which each such stockholder will be subject to a 180-day lock-up on the sale or transfer of shares of our common stock and Series A Preferred Stock held by each such stockholder at the closing of the Vidya Acquisition, including those shares received by former Vidya securityholders in the Vidya Acquisition. Upon expiration of this 180-day lock-up period, these shares will become eligible for sale in the public market.

In connection with the closing of the 2026 Private Placement, we entered into a Registration Rights Agreement with the investors, and pursuant to the Merger Agreement, we are required to register the resale of all shares of common stock underlying the Series A Preferred Stock issued in connection with the Vidya Acquisition and the 2026 Private Placement. Under the Registration Rights Agreement, we are required to prepare and file a resale registration statement with the SEC within 75 calendar days following the closing of the 2026 Private Placement. We are obligated to use our reasonable best efforts to cause this registration statement to be declared effective by the SEC within five business days of the date we are notified by the SEC that the registration statement will not be reviewed or will not be subject to further review (or within 60 calendar days following the filing deadline if the SEC reviews the registration statement). Once this registration statement is declared effective and the restricted securities legends on the shares issued in connection with the Vidya Acquisition and the 2026 Private Placement are removed, the shares subject to such registration statement will no longer constitute restricted securities and may be sold freely in the public markets, subject to any beneficial ownership limitations set by the holder of Series A Preferred Stock or lapse on any related contractual restrictions of any Investor. If our stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after legal restrictions on resale lapse, the trading price of our common stock could decline. In addition, shares of our common stock that are subject to outstanding options will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements and Rules 144 and 701 under the Securities Act of 1933, as amended.

We may become involved in litigation, including securities class action litigation, that could divert management’s attention and harm our business, and insurance coverage may not be sufficient to cover all costs and damages.

In the past, litigation, including securities class action litigation, has often followed certain significant business transactions, such as the Vidya Acquisition. These events may also result in investigations by the SEC or other government agencies. We may be exposed to such litigation and resulting costs in connection with the Vidya Acquisition even if no wrongdoing occurred.

Furthermore, the stock market in general, and Nasdaq and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. The market price of our common stock may be volatile, and we may be the target of this type of litigation in the future.

Litigation is usually expensive and diverts management’s attention and resources from other business concerns, which could adversely affect our business and cash resources.