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

You should read the following discussion and analysis of our financial condition and results of operations together with our interim condensed financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020,2021, as may be amended, supplemented or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This Quarterly Report contains forward-looking statements that involve substantial risks and uncertainties. Any statements in this Quarterly Report about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future management and organizational structure are all forward-looking statements. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. 

Any forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout this Quarterly Report. Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include but are not limited to:

The foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forward-looking statements, which speak only as of the date of this Quarterly Report or the date of the document incorporated by reference into this Quarterly Report.  Except as required by law, we assume no obligation and expressly disclaim any duty to update any forward-looking statement to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements contained in this Quarterly Report. All forward-looking statements are expressly qualified in their entirety by the cautionary statements contained in this section.

Overview

We are a clinical stage gene therapy company focused on developing life-changing treatmentspioneering the development of gene-based therapies for cancer and diabetes.large patient populations with unmet medical needs.  Our lead cancer drug candidate, REQORSA™ Immunogene therapy drug (also referred to as GPX-001), is being developed to treat non-small cell lung cancer ("NSCLC"). The active agent in REQORSA is a TUSC2 gene expressing plasmidoncology platform utilizes our non-viral ONCOPREX™ Nanoparticle Delivery System.  Using this system, we encapsulate plasmids that is encapsulated in a DOTAP cholesterol lipid nanoparticle.  TUSC2 is aexpress tumor suppressor genegenes within lipid nanoparticles and intravenously administer the encapsulated plasmids which has bothare taken up by the tumor killing (via apoptosis) and immunomodulatory effects. We utilize our novel proprietary ONCOPREX® Nanoparticle Delivery System to delivercells, after which the TUSC2 gene expressing plasmid to cancertumor suppressor genes express proteins that are missing or found in low quantities in the tumor cells.  The TUSC2 gene is one of a series of genes whose therapeutic use is covered by our exclusive worldwide licenses from The University of Texas MD Anderson Cancer Center. 

Our Acclaim-1 clinical trial is a Phase 1/2 study using a combination of REQORSA with AstraZeneca PLC’s Tagrisso® in patients with late-stage NSCLC with mutated epidermal growth factor receptors ("EGFRs") whose disease progressed after treatment with Tagrisso. In January 2020, we received U.S. Food and Drug Administration ("FDA") Fast Track Designation for our Acclaim-1 trial.  In June 2021, we announced that the FDA had reviewed and confirmed all comments have been addressed regarding our Acclaim-1 clinical trial protocol and that we had engaged our first clinical site for our Acclaim-1 trial. We expect that patient enrollment will commence in our Acclaim-1 clinical trial no later than the fourth quarter of 2021.

Our Acclaim-2 clinical trial is a Phase 1/2 study using a combination of REQORSA with Merck & Co.’s Keytruda® in late-stage NSCLC patients. We expect that we will initiate the Acclaim-2 clinical trial in 2021.

In diabetes we are developing a gene therapy that is exclusively licensed from the University of Pittsburgh of the Commonwealth System of Higher Education for the treatment of Type 1 and Type 2 diabetes. This potential treatmenttechnology is designed to work by transforming alpha cells in the pancreas into functional beta-like cells, which can produce insulin but are distinct enough from beta cells to evade the body’s immune system. Our diabetes product candidate is currently being evaluated in preclinical studies.

Oncology Platform

Utilizing our non-viral ONCOPREX Nanoparticle Delivery System, we are developing cancer treatments that are designed to administer cancer fighting genes. We encapsulate the gene-expressing plasmids using ONCOPREX lipid nanoparticles, and administer them intravenously, where they are then taken up by tumor cells and express proteins that are missing or found in low quantities in the tumor cells. With ourOur lead oncology drug candidate, REQORSA™ Immunogene Therapy, also sometimes referred to as GPX-001, initially is being developed in combination with top selling cancer drugs to treat Non-Small Cell Lung Cancer (“NSCLC”) and Small Cell Lung Cancer (“SCLC”). The active agent in REQORSA there is a plasmid that expresses a tumor suppressor gene named TUSC2. REQORSA has a multimodal mechanism of action whereby REQORSAit interrupts cell signaling pathways that cause replication and proliferation of cancer cells, re-establishes pathways for apoptosis, or programmed cell death, in cancer cells, and modulates the immune response against cancer cells. REQORSA has also been shown to block mechanisms that create drug resistance.be complementary with targeted drugs and immunotherapies.  We believe REQORSA’s unique attributes position REQORSA to provide treatment for patients with NSCLC, SCLC, and possibly other cancers, who are not benefitting from current therapies.    

We currently are enrolling and treating patients in two Phase 1/2 clinical trials in NSCLC, our Acclaim-1 and Acclaim-2 clinical trials. The Acclaim-1 clinical trial (“Acclaim-1") is using a combination of REQORSA with AstraZeneca PLC’s Tagrisso® in patients with late-stage NSCLC with activating epidermal growth factor receptor ("EGFR") mutations, whose disease progressed after treatment with Tagrisso. In August 2022, the Acclaim-1 Safety Review Committee approved escalating the dose in the second cohort of patients to 0.09 mg/kg from 0.06 mg/kg in the first cohort. We expect the Phase 1 portion of Acclaim-1 to be completed by year end 2022. The Acclaim-2 clinical trial (“Acclaim-2”) is using a combination of REQORSA with Merck & Co.’s Keytruda® in patients with late-stage NSCLC whose disease progressed after treatment with Keytruda. The first patient was dosed in Acclaim-2 in April 2022. We expect to complete the Phase 1 portion of Acclaim-2 by mid 2023. The Food and Drug Administration (“FDA”) has granted two Fast Track Designations, one for use of REQORSA in the patient population targeted in each of these trials. 

We expect to initiate a clinical trial in SCLC by year end 2022 by filing with the FDA a new or amended Investigational New Drug Application (“IND”).

The TUSC2 gene is one of a series of genes whose therapeutic use is covered by our exclusive worldwide licenses from The University of Texas MD Anderson Cancer Center ("MD Anderson").  We believe that our ONCOPREX Nanoparticle Delivery System could allowallows for delivery of a number ofseveral cancer-fighting genes, alone or in combination with other cancer therapies, to combat multiple types of cancer. We believe that REQORSA’s combinationcancer and are in early stages of pan-kinase inhibition, direct induction of apoptosis, anti-cancer immune modulation and complementary action with targeted drugs and immunotherapies is unique, and positions REQORSAdiscovery programs to provide treatment for patients with NSCLC and possibly other cancers, who are not benefitting from current therapies.identify early-stage candidates.

Diabetes Gene Therapy

OurIn diabetes, we are developing a gene therapy also referred to as GPX-002, was developed by lead researcher Dr. George Gittes, at the Rangos Research Center atthat is exclusively licensed from the University of Pittsburgh Medical Center Children’s Hospital.of the Commonwealth System of Higher Education (“University of Pittsburgh”) for the treatment of Type 1 and Type 2 diabetes. This potential treatment is designed to work by transforming alpha cells in the pancreas into functional beta-like cells, which can produce insulin but are distinct enough from beta cells to evade the body’s immune system. The therapy utilizes a procedure in which an adeno-associated virus vector delivers Pdx1 and MafA genes to the pancreas.

pancreas through the pancreatic duct. Our diabetes product candidate is currently being evaluated in preclinical studies at the University of Pittsburgh. In August 2022, we entered into a Sponsored Research Agreement with the University of Pittsburgh to support further pre-clinical studies of Type 2 diabetes in non-human primates.

JOBS Act

On April 5, 2012, the Jumpstart Our Business StartupsJOBS Act of 2012 (the “JOBS Act”) was enacted. 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. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Although we are an emerging growth company, we have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. We have implemented all new accounting pronouncements that are in effect and may affect our financial statements, and we do not believe that there are any other new accounting pronouncements that have been issued that would have a material impact on our financial position or results of operations.

Notwithstanding the foregoing, subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain exemptions, including, without limitation, the exemption from the requirements (i) to provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, of 2002, as amended, and (ii) 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, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest 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 last day of our fiscal year following the fifth anniversary of the date of our initial public offering; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our financial statements appearing in this Quarterly Report on Form 10-Q.

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP"). The preparation of these condensed financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed financial statements, and the reported amounts of expenses incurred during the reporting periods. Our estimates are based on our 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 believe that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

Research and Development Costs

We record accrued expenses for costs invoiced from research and development activities conducted on our behalf by third-party service providers, which include the conduct of preclinical studies and clinical trials and contract research, manufacturing, and manufacturingtesting activities. We record the costs of research and development activities based upon the amount of services provided, and we include these costs in accrued liabilities in the condensed balance sheets and within research and development expense in the condensed statements of operations. These costs are a significant component of our research and development expenses. Purchased materials to be used in future research are capitalized and included in research and development supplies.

We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. We make significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed, the number of patients enrolled and the rate of patient enrollment in any of our clinical trials may vary from our estimates and could result in our reporting amounts that are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from contract research organizations ("CROs") and other third-party service providers. To date, there have been no material differences from our accrued expenses to actual expenses. 

Income Taxes

Deferred tax assets or liabilities are recorded for temporary differences between financial statement and tax basis of assets and liabilities, using applicable rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded if it is more likely than not that a deferred tax asset will not be realized. We have provided a full valuation allowance on our deferred tax assets, which primarily consist of cumulative net operating losses from April 1, 2009 (inception) to June 30, 2021.2022. Due to our history of operating losses since inception and losses expected to be incurred in the foreseeable future, a full valuation allowance was considered necessary.

Impairment of Long-Lived Assets

Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be realizable or at a minimum annually during the fourth quarter of the year. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying value to determine if an impairment of such asset is necessary. The effect of any impairment would be to expense the difference between the fair value of such asset and its carrying value.

Off-Balance Sheet Arrangements; Commitments and Contractual Obligations

As of June 30, 2021, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources nor did we have any commitments or contractual obligations.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our unaudited condensed financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Components of our Results of Operations and Financial Condition

Operating expenses

We classify our operating expenses into three categories: research and development, general and administrative and depreciation.

Research and development. Research and development expenses consist primarily of:

We recognize all research and development costs as they are incurred. Clinical trial costs, contract manufacturing and other development costs incurred by third parties are expensed as the contracted work is performed.

We expect our research and development expenses to increase in the future as we advance our current and future product candidates into and through clinical trials, as we pursue regulatory approval of our current and potential product candidates in the United States and Europe, and as we expand our research programs to include new therapies and new therapy combinations. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our current and potential product candidates may be affected by a variety of factors including the quality of our current and potential product candidates, early clinical data, investment in our clinical program, competition, manufacturing capability and commercial viability.viability, and limited contracted partners. We may never succeed in achieving regulatory approval for any of our current or future product candidates. As a result of the uncertainties discussed above, 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 our product candidates, if at all.

General and administrative. General and administrative expense consists of personnel related costs, which include salaries, as well as the costs of professional services, such as accounting and legal, travel, facilities, information technology and other administrative expenses. We expect our general and administrative expense to increase in future periods due to the anticipated growth of our business and related infrastructure as well as accounting, insurance, investor relations, and other costs associated with being a public company.

Depreciation. Depreciation expense consists of depreciation from our fixed assets consisting of our property, equipment, and furniture. We depreciate our assets over their estimated useful life. We estimate furniture and computer and office equipment to have a five-year life.

Results of Operations

Comparison of the Three and Six Months Ended June 30, 20212022, and 20202021

The following summarizes our results of operations for the three and six months ended June 30, 20212022, and 2020.2021.

Research and Development Expense

Research and developmentDevelopment ("R&D") expense for the three months ended June 30, 2021,2022, was $1,526,277 as$2,737,028, compared to $2,155,637$1,526,277 for the three months ended June 30, 2020. The decrease of $629,360, or 29%, is due primarily to a larger than normal share-based compensation expense in 2020 associated with a one-time accelerated vesting of options held by a former R&D executive pursuant to his separation agreement. Equity-based compensation associated with R&D personnel, a non-cash expense, accounted for $293,439 and $1,609,683 of the R&D expenses for the three months ended June 30, 2021 and 2020, respectively. Excluding equity-based compensation for R&D personnel, R&D expense was $1,232,839 and $545,953 for the three months ended June 30, 2021 and 2020, respectively. The2021. This increase of $686,886,$1,210,751, or 126%79%, is primarily due to preparation of REQORSA for our Acclaim-1increases in pre-clinical research and Acclaim-2manufacturing activities and clinical trials and increased usage of third-parties to develop strategy for and execute onoperations expenses associated with the launchadvancements of our Acclaim-1 and Acclaim-2 clinical trials. 

R&D expense for the six months ended June 30, 2021,2022, was $3,695,420 as$4,597,864, compared to $3,633,514$3,695,420 for the six months ended June 30, 2020. The2021. This increase of $61,906,902,444, or 2%24%, is primarily due to advancementsincreases in preparation for our Acclaim-1manufacturing activities and Acclaim-2 trials. Equity-based compensationclinical operations expenses associated with R&D personnel, a non-cash expense, accounted for $383,303the commencement and $1,987,097 of the R&D expenses for the six months ended June 30, 2021 and 2020, respectively. Excluding equity-based compensation for R&D personnel, R&D expense was $3,312,117 and $1,646,416 for the six months ended June 30, 2021 and 2020, respectively. The increase of $1,665,701, or 101%, is primarily due to (i) major advancements in our manufacturing programs providing drug product for our Acclaim-1 and Acclaim-2 clinical trials, (ii) increased usage of third-parties to develop strategy for and execute on the launch of our Acclaim-1 and Acclaim-2 clinical trials, and (iii) significant ramp up in R&D personnel to support our Acclaim-1 and Acclaim-2 trials. We anticipate that these R&D activities will continue throughout 2021 and thereafter and will continue to include costs related to the ongoing support of our Acclaim-1 and Acclaim-2 clinical trials. 

General and Administrative Expense

General and administrative ("G&A") expense for the three months ended June 30, 2021,2022, was $2,458,097 as$2,431,499, compared to $2,216,691$2,458,097 for the three months ended June 30, 2020.2021, or a decrease of $26,598, or 1%. The increase of $241,406, or 11%, islarger G&A expense in the three months ended June 30, 2021, was primarily due to accrual of paid time off ("PTO")equity-based compensation charges during this period. The decrease in G&A expenses for the six months ended June 30, 2022, is offset by increases in consulting services and employee bonuses due to new PTO policies and implementation of a total rewards strategy for recruitment and retention of employees, increases in personnel expenses related to insurance premiums and increases in equity-based compensation for employees and consultants.contributions to a newly implemented 401(k) plan. 

G&A expense for the six months ended June 30, 2021,2022, was $6,774,407 as$6,287,295 compared to $6,309,687$6,774,407 for the six months ended June 30, 2020.2021, or a decrease of $487,112, or 7%. The increase of $464,720, or 7%, issmaller G&A expense in the six months ended June 30, 2022, was primarily due to accruala one-time finance fee of PTO and accrual$1,750,000 in connection with a registered direct offering during the period ended June 30, 2021. The decrease in G&A expenses in the first half of employee bonuses due to new PTO policies and implementation of a total rewards strategy for recruitment and retention of employees, increases in insurance premiums, and2022 is offset by increases in equity-based compensation fordue to the vesting of stock options by employees and consultants. We believe that year-over-year G&A expenses have remained mostly flat due to noconsultants and increases in G&A personnel or operating activities as we focused on ramping up our R&D effortsexpenses, including insurance premiums and contributions to support our Acclaim-1 and Acclaim-2 clinical trials. a newly implemented 401(k) plan, during the six months ended June 30, 2022.

Interest Income. Interest income was $1,104$5,744 and $4,811$1,104 for the three months ended June 30, 2022, and 2021, and 2020, respectively, a decreaserepresenting an increase of $3,707,$4,640, or 77%. Interest income was $3,086 and $14,817 for the six months ended June 30, 2021 and 2020, respectively, a decrease of $11,731, or 79%420%. The decreasesincrease associated with interest income for the three and six months ended June 30, 2021,2022 were due to cashback incentives associated with credit cards and changes in interest rates associated with the cash balances associated withheld in money market instruments.

Depreciation Expense. Depreciation expense was $2,848$6,543 and $5,776$2,848 for the three months ended June 30, 2022, and 2021, and 2020, respectively, a decreaserepresenting an increase of $2,928,$3,695, or 51%. Depreciation expense was $9,090 and $11,129 for the six months ended June 30, 2021 and 2020, respectively, a decrease of $2,039, or 18%130%. The decreaseschanges in associated depreciation expense for the three and six months ended June 30, 2021,2022 were due to the remaining useful life of R&D equipment used in manufacturing of REQORSA and the timing of purchases of computer equipment for new employees.

Net Loss. We had a net loss of $5,169,326 and $3,986,118 for the three months ended June 30, 2022, and 2021, respectively, representing an increase of $1,183,208, or 30%. The increase in net loss is due to our headcount growing from 13 to 22 employees since June 30, 2021 as well as R&D expenses associated with the commencement of our Acclaim-1 and Acclaim-2 clinical trials. 

Liquidity and Capital Resources

From inception through June 30, 2021,2022, we have never generated revenue from product sales and have incurred net losses in each year. As of June 30, 2021,2022, we had an accumulated deficit of $68,898,060.$88,909,663. We have funded our operations primarily through the sale and issuance of capital stock. For the year ended December 31, 2020, we sold an aggregate of 16,697,884 shares of common stock for total net proceeds of $34,493,423 pursuant to registered direct offerings and issued 7,104,524 shares of common stock upon the exercise of warrants and options for gross proceeds of $3,857,886. During the six months ended June 30, 2021, we sold an aggregate of 4,000,000 shares of common stock for total grossnet proceeds of $25,000,000$23,192,500 pursuant to a registered direct offering and issued 395,176670,889 shares of common stock upon the exercise of options for gross proceeds of $434,363.$677,912. We did not sell any shares of common stock during the six months ended June 30, 2022. 

As of June 30, 2021,2022, we had $44,243,449$30,053,021 in cash and cash equivalents.

We do not expect to generate revenue from product sales unless and until we successfully complete development of, obtain regulatory approval for and begin to commercialize one or more of our current or potential product candidates, which we expect will take a number ofseveral years and which is subject to significant uncertainty. Accordingly, we anticipate that we will need to raise additional capital to fund our future operations, which include conducting our Acclaim-1 and our Acclaim-2 clinical trials.trials, launching a SCLC clinical trial and continuing the development of our gene therapy for diabetes. Our Acclaim 1 and Acclaim 2 trials are both open for enrollment. The first patient in Acclaim-1 was initiateddosed in June 2021 withFebruary 2022 and in August 2022 the FDA having reviewed and confirmed all comments had been addressed regardingSafety Review Committee approved escalating the protocol with respect to suchdose in the second cohort of patients. The first patient in Acclaim-2 was dosed in April 2022. We expect the Phase 1 portion of the Acclaim-1 trial and our engagement of our first clinical site. Patient enrollment is expected to commence no later than the fourth quarter of 2021. Acclaim-2 is expected to be initiatedcompleted by year end 2022 and we expect the Phase 1 portion of the Acclaim-2 trial to be completed in 2021.the middle of of 2023. We expect to initiate a clinical trial in SCLC by the end of 2022. Until such time as we can generate substantial revenue from product sales, if ever, we expect to finance our operating activities through a combination of equity offerings and debt financings and we may seek to raise additional capital through strategic collaborations. However, we may be unable to raise additional funds or enter into such arrangements when needed on favorable terms, or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our development programs or commercialization efforts or grant rights to others to develop or market product candidates that we would otherwise prefer to develop and market ourselves. Failure to receive additional funding could cause us to curtail or cease our operations. Furthermore, even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations.

Based on our current cash and cash equivalents, we estimate that we will be able to fund our expenditure requirements for our current operations and planned clinical trial activities into 2024. We have based these estimatesthis estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently plan due to economic factors, such as inflation, incorrect assumptions, or due to a decision to expand our activities, or innovate existing activities beyond those currently planned. We also have been experiencing delays related to COVID-19 with respect to the launch ofin engaging clinical sites for our Acclaim-1 and Acclaim-2 clinical trials. Specifically, we have experienced delays in engaging clinical sites as a resulttrials because of a backlog of clinical trial protocols at the sites requiring review created by an accumulation of protocols while clinical trials have been widely disrupted during the COVID-19 pandemic and workforce shortages that have been impacting the U.S. economy in general. Although continued delays will enable us to fund our expenditure requirements for our current operations and planned clinical trial activities longer, we would not be advancing our clinical trials as anticipated and utilizing our available capital resources to support our operations only.

The following table sets forth the primary sources and uses of cash and cash equivalents during the six months ended June 30, 20212022, and 2020:2021:

Cash used in operating activities

Net cash used in operating activities was $8,432,093$8,621,651 and $8,027,875$8,432,093 for the six months ended June 30, 2022, and 2021, and 2020, respectively.respectively, or an increase of $189,559, or 2%. The $404,218, or 5%, increaseone-time finance fee of $1,750,000 in net cash used in operating activities during the six months ended June 30, 2021, was offset in the six months ended June 30, 2022, due to us increasingour personnel expenses growing as a result of the expansion of our headcount and advancingfrom 13 to 22 employees as well as increases in contract manufacturing and clinical programs to launch ourstrategy expenses as the Phase I portion of the Acclaim-1 clinical trial in June 2021 and in preparation for the launch of our Acclaim-2 clinical trial planned in 2021.trials commenced. 

Cash usedprovided (used) in investing activities

Net cash used inprovided by investing activities was $78,505 and $148,304$45,796 for the six months ended June 30, 20212022, and 2020, respectively. This decrease of $69,799, or 47%,the net cash used by investing activities was primarily due to timing of manufacturing programs to develop REQORSA and patent prosecution costs related to defending our technologies. Investments in property and equipment were negligible between the six months ended June 30, 2021 and 2020. Investments in intellectual property was $25,275 greater$78,505 for the six months ended June 30, 2020 than the six months ended June 30, 2021 due to patent prosecution costs related to the acquisition of our diabetes technology in the first half of 2020. Additions to R&D materials was $40,904 greater for the six months ended June 30, 2020, than the six months ended June 30, 2021. This changedecrease of $120,349, or 109%, was due to increases in manufacturingtiming and use of our Oncoprex delivery system in 2020 as we preparedmaterials for manufacturing of REQORSA and greater usage of R&D materials in 2021 for quality testing as we prepare REQORSA for our Acclaim-1 and Acclaim-2 clinical trials. 

Cash provided by financing activities

Net cash provided by financing activities was $25,434,363$0 and $28,300,866$25,434,363 during the six months ended June 30, 20212022, and 2020,2021, respectively. The decrease of $2,866,503,$25,434,363, or 10%100%, in net cash provided by financing activities was due to our sellingsignificant sales of more common stock in capital raising activities and greater option and warrant exercises during the six months ended June 30, 2020,2021, compared to the six months ended June 30, 2021.2022, in which we did not sell any common stock. 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2021.2022. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of June 30, 2021,2022, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective due to the material weakness in our internal control over financial reporting due to the lack of segregation of duties. 

Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to maintain effective segregation of duties on our assessment of our internal control over financial reporting and has concluded that the control deficiency represents a material weakness. 

In response to the material weakness described above, during the quarter ended June 30, 2021,2022, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with GAAP. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

Remediation Plans

Our management hasManagement is actively engaged in and is continuing to be engaged inremediation efforts to remediate the control deficiency that led toaddress the material weakness.weakness identified in the management’s evaluation of internal controls and procedures. The remediation plan includes implementingefforts, which have been or are in the following steps:process of being implemented, are intended to address the identified material weakness, and include

We plan to have our enhanced review procedures and documentation standards in place and operating byDuring the end of 2021. Our goal isquarter ended June 30, 2022, we took actions to remediate the material weakness byrelating to our internal controls over financial reporting including the endevaluation and improvement of 2022, subjectprocedures and processes associated with new accounting software and workflows to there beingsegregate duties among our accounting staff.

As Management continues to evaluate and work to improve its internal control over financial reporting, we may take additional measures to address control deficiencies, or we may modify certain of the remediation measures described above. While remediation efforts are active, management requires additional time to demonstrate the operating effectiveness of our remediation efforts. The material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient opportunities to conclude,period of time and management has concluded, through testing, that the enhancedthese controls are operating effectively.

Changes in Internal Control over Financial Reporting

During the quarter ended June 30, 2021, management continued to implement certain remediation measures to improve our internal controls over financial reporting and to remediate previously identified material weaknesses. However,Except as described above, there were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2021,2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of Disclosure Controls and Internal Control over Financial Reporting

Because of their inherent limitations, our disclosure controls and procedures and our internal control over financial reporting may not prevent material errors or fraud. Management recognizes that any controls and procedures,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, and management necessarily applies its judgment in evaluating the cost-benefit relationshipmet. The effectiveness of possibleour disclosure controls and procedures.procedures and our internal control over financial reporting is subject to risks, including that the controls may become inadequate because of changes in conditions or that the degree of compliance with our policies or procedures may deteriorate.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results.

Item 1A. Risk Factors

Risk factors that affect our business and financial results are discussedThe Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 26, 2021 (“Annual Report”). Except as set forth below, there have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report, which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If anyRule 12b-2 of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

Our business may be adversely affected by the ongoing coronavirus pandemic which has delayed and may continue to delay our clinical trials and may have other adverse effects on our business and operations.

The outbreak of the novel coronavirus ("COVID-19") evolved into a global pandemic as COVID-19 spread to many regions of the world. The extent to which COVID-19 impacts our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, including variants such as the delta variant, and the actions to contain COVID-19 or treat its impact, among others.

As a result of the continuing spread of COVID-19, our business operations have been interrupted and delayed. Specifically, in June 2021, we initiated our Acclaim-1 clinical trial with the FDA having reviewed and confirmed all comments had been addressed regarding the protocol with respect to such trial and our engagement of our first clinical site; however, we have experienced delays in engaging clinical sites as a result of a backlog of clinical trial protocols requiring review created by an accumulation of protocols while clinical trials have been widely disrupted during the pandemic and workforce shortages that have been impacting the U.S. economy in general. Additionally, manufacturing and testing, site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials, study monitoring, data analysis, and laboratory research activities may be paused or delayed due to changes in hospital or university policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to the COVID-19 pandemic. If COVID-19 continues to spread, some participants and clinical investigators may not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, further delaying our clinical trials and potentially rendering us unable to conduct our trials at all. In addition, infections and deaths related to the COVID-19 pandemic may disrupt the United States’ healthcare and healthcare regulatory systems. Such disruptions could divert healthcare resources away from, or materially delay FDA review and/or approval with respect to, our clinical trials. It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of our clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of our product candidates. Specifically, we may experience further delays in our Acclaim-1 trial or delays in our Acclaim-2 trial which we expect to initiate in 2021 if our REQORSA drug that is intended to be utilized for such trials expires and is no longer usable. Moreover, if the COVID-19 pandemic continues and our operations are further adversely impacted, we risk a delay, default and/or nonperformance under existing agreements which may increase our costs. These cost increases may not be fully recoverable or adequately covered by insurance.

We currently utilize third parties to, among other things, manufacture raw materials and to manufacture clinical product. If any third-party parties in the supply chain for materials used in the production of our product candidates or the third-party manufacturers of our product candidates themselves are adversely impacted by restrictions resulting from the COVID-19 outbreak, our ability to manufacture our product candidates for our clinical trials and research and development activities related thereto may be disrupted. In particular, we utilize lipids in the manufacture of REQORSA. Lipids are also used in the production of various COVID-19 vaccines and this has resulted in increased demand for this material and may limit the available supply.

The spread of COVID-19, which has caused a broad impact globally, including restrictions on travel and quarantine policies put into place by businesses and governments, may have a material economic effect on our business. While the potential economic impact brought by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruption of global financial markets, which may reduce our ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the spread of COVID-19 could materially and adversely affect our business and the value of our common stock.

The ultimate impact of the COVID-19 pandemic, or any other health epidemic, is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole. However, these effects could have a material impact on our operations, and we will continue to monitor the situation closely.Exchange Act.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On April 1, 2021,2022, we issued 5,000 shares of our common stock to a consultant in consideration for services. The foregoing issuance of securities was not registered under the Securities Act or the securities laws of any state, and the securities were offered and issued in reliance on the exemption from registration under the Securities Act afforded by Section 4(a)(2).

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.Our Chairman, Chief Executive Officer and President, Rodney Varner, has been diagnosed with a cutaneous lymphoma and has been undergoing chemotherapy treatment. Mr. Varner has been continuing in his roles at the Company during this period and expects to continue to do so, although he has limited some business activities, including travel and taking certain time off. The Board has taken steps in order to ensure smooth continuity of business priorities and operations during this period, which include, but are not limited to, more integrated roles of Catherine Vaczy, the Company’s Executive Vice President, General Counsel and Chief Strategy Officer Ryan Confer, the Company’s Chief Financial Officer and the Board, in the event of periods of unavailability of Mr. Varner.

Item 6. Exhibits

INDEX TO EXHIBITS

*  Filed herewith.

+  Indicates management contract or compensatory plan.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.