As filed with the U.S. Securities and Exchange Commission on July 30, 2018

Registration No. 333-        

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

AMENDMENT NO. 3

FORM S-1

REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933

HEATWURX, INC.

(Exact name of registrant as specified in its charter)

_________________

7380 Coca Cola Drive, Suite 106,

Hanover, Maryland 21076

(443) 776-3133

(Address and telephone number of principal executive offices)

_________________David Young, Pharm.D., Ph.D.

Chief Executive Officer

7380 Coca Cola Drive, Suite 106,

Hanover, Maryland 21076

(443) 776-3133

(Name, address and telephone number of agent for service)

Copies to:

Michael B. Kirwan

AdamJohn J. AgronWolfel, Jr.

Rikard LundbergFoley & Lardner LLP

Brownstein Hyatt Farber Schreck, LLPOne Independent Drive, Suite 1300

410 17^th Street, 22^nd FloorJacksonville, Florida 32202

Denver, Colorado 80202

(303) 223-1100

(303) 223-1111 (fax)

(904) 359-2000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Approximate date of commencement of proposed sale to the public:As soon as practicalFrom time to time after this registration statement is declared effective by the SEC.becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: [  ]box. [X]

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities1933 Act, please check the following box and list the Securities1933 Act registration statement number of the earlier effective registration statement for the same offering. [  ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities1933 Act, check the following box and list the Securities1933 Act registration statement number of the earlier effective registration statement for the same offering. [  ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities1933 Act, check the following box and list the Securities1933 Act registration statement number of the earlier effective registration statement for the same offering. [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Ac.Act of 1934. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. [X]

CALCULATION OF REGISTRATION FEE

(3)

 In accordance with Rule 457(i), there is no additional fee with respect to the common stock and warrants underlying the units.

Each share of Preferred Stock will convert automatically into common stock upon the closing of this offering.  It is assumed that the common stock underlying the Series A, B and C Preferred Stock will sell for $5.15 per share solely for the purpose of calculating the registration fee in accordance with Rule 457(a) under the Securities Act, as amended.

(5)

The Company paid the total registration fee with the initial Form S-1 filing on November 14, 2012 and Amendment No. 1 to the initial Form S-1 filing on January 11, 2013.

The registrantRegistrant hereby amends this registration statementRegistration Statement on such date or dates as may be necessary to delay its effective date until the registrantRegistrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

Explanatory Note

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

PRELIMINARY PROSPECTUS

SUBJECT TO COMPLETION, DATED JULY 30, 2018

PROCESSA PHARMACEUTICALS, INC.

6,379,267 SHARES OF COMMON STOCK

This Registration Statement contains two prospectuses.

The first prospectus forming a partrelates to the resale by certain of our stockholders and holders of warrants to purchase our stock named in the section of this Registration Statement isprospectus titled “Selling Stockholders” (collectively, the “Selling Stockholders”) of up to be used in connection with6,379,267 shares (collectively, the underwritten public offering“Shares”) of 1,500,000 units offered at $5.20 per unit.  Each unit consists of one share ofour common stock, and one half (1/2) common stock purchase warrant to acquire one share of common stock for $5.15 per share for a period of one year. A total of 1,500,000 units arepar value $0.0001. The Shares being offered by the Company. The units will not trade separately.  If the Underwriter exercises its over-allotment option to purchase up to 225,000 Units, we have an obligation to purchase up to 200,000under this prospectus are comprised of:

(a) 2,010,594 shares of common stock at $4.784 per share and upthat were purchased by certain Selling Stockholders in private placements with us pursuant to an additional 100,000exemptions from the registration requirements of the Securities Act;

(b) 1,073,466 shares of common stock at $5.15 per share outthat were issued to certain Selling Stockholders after conversion of the proceeds from the exercise of the over-allotment option and the exercise of the warrants underlying such Units, respectively, from a selling stockholder.  The shares purchased from the stockholder will be retired by us.our 8.0% Senior Convertible Notes;

Accordingly, the registrant is registering 2,587,500 shares of common stock underlying the 1,725,000 units of common stock and warrants which includes 225,000 units subject to our Underwriter’s overallotment option. The common stock and warrants underlying the units will be listed and traded separately as more fully disclosed in the first prospectus. The first prospectus immediately follows this explanatory note.

The second prospectus forming a part of this Registration Statement is to be used by stockholders of the registrant in connection with the resale of up to 1,450,000 shares of common stock and up to 6,460,000(c) 2,142,318 shares of common stock issuable upon exercise of warrants allowing the automatic conversion of our Series A, B, and C Preferred Stock upon the effectiveness of this offering.

The second prospectus, which immediately follows the first prospectus, consists of:

·

the cover page;

·

Table of Contents;

·

Prospectus Summary;

·

pages 4 through 43 of the first prospectus, other than the sections entitled “Use of Proceeds,” “Determination of Offering Price” and “Underwriting,” and pages F-1 through F-17 of the first prospectus;

·

pages SS-1 through SS-8 which will appear in place of the section entitled “Underwriting”; and

·

the back cover page.

The selling stockholders will sell their stock at $5.15 per share, which is the offering price.  Actual prices may vary based on prevailing market prices or privately negotiated prices.  The selling stockholders may not sell any of their common stock until the Underwriter’s have completed the primary offering, including the over-allotment portion thereof.

Heatwurx, Inc.

1,500,000 Units

$5.20 per Unit

This is the initial public offering of Heatwurx, Inc.  Each unit consists of one share of common stock and one half (1/2) common stock purchase warrant which may be exercisedholder to purchase one share of our common stock at $5.15 per share for a period of one year.  A total of 1,500,000 units are being offered by the Company. No public market currently exists for our common stock or warrants.  We anticipate that the initial public offering price will be $5.20 per unit.  The units will not trade separately as units.

If the Underwriter exercises its over-allotment option to purchase up to 225,000 Units, we have an obligation to purchase up to 200,000 shares of common stock at $4.784an exercise price of $2.724 per share and up to an additional 100,000 shares of common stock at $5.15 per share out of the proceeds from the exercise of the over-allotment option and the exercise of the warrants underlying such Units, respectively, from a selling stockholder.  The shares purchased from the stockholder will be retired by us.through June 29, 2021;

We have also registered by separate prospectus the resale by our existing stockholders 1,450,000 shares of common stock and up to 6,460,000(d) 1,152,889 shares of common stock issuable upon conversionexercise of 2,860,000a warrants allowing the holder to purchase shares of Series A, B and C Preferred Stock.  Resale shares owned by officers and directors and by one common stockholder are subject to a 13 month lockup.  See “Underwriting.”

Prior to this offering, there has been no public market for our common stock and/at an exercise price of $2.452 per share through June 29, 2021; and

Although we will pay substantially all the expenses incident to the registration of the Shares, we will not receive any proceeds from the sales by the Selling Stockholders. The Selling Stockholders and any underwriter, broker-dealer or warrants.  We have applied to list our common stockagent that participates in the sale of the Shares or interests therein may be deemed “underwriters” within the meaning of Section 2(a)(11) of the Securities Act. Any discounts, commissions, concessions, profit or other compensation any of them earns on any sale or resale of the shares, directly or indirectly, may be underwriting discounts and $5.15 warrants for quotation on the NASDAQ Exchangecommissions under the proposed symbolsSecurities Act. The Selling Stockholders who are “underwriters” within the meaning of “HWX” and “HWXX,” respectively.

We are an “emerging growth company” underSection 2(a)(11) of the federal securities laws andSecurities Act will be subject to reduced public company reporting requirements. Investing inthe prospectus delivery requirements of the Securities Act.

Our common stock is presently quoted for trading under the symbol “PCSA” on the OTC Pink Tier of the OTC Markets Group, Inc. (the “OTCPink”). On July 25, 2018, the closing price of our common stock, as reported on the OTCPink was $2.65 per share. The Selling Stockholders have advised us that they will sell the shares of common stock registered hereunder from time to time in the open market, on the OTCPink, in privately negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices, or otherwise as described under the section of this prospectus titled “Plan of Distribution.”The purchase of the Shares offered through this prospectus involves risks. See “Riska high degree of risk. Please refer to “Risk Factors” beginning on page 4.6.

Investing in our common stock and warrants involves risks that are described in the “Risk Factors” section beginning on page 4 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined ifpassed upon the adequacy or accuracy of this prospectus is truthful or complete.prospectus. Any representation to the contrary is a criminal offense.

(1)

- The Underwriting discount and commissions does not include a 3% non-accountable expense allowance that is also payable to the Underwriter.  Please also see the section indate of this prospectus entitled “Underwriting”.

Our Underwriter is       offering these units on a firm commitment basis and expects that delivery of the underlying common shares and warrants will be made on or about __________, 2013.  To the extent that the Underwriter sells more than 1,500,000 units, the Underwriter has a 45-day option to purchase up to 225,000 additional units from us at the initial public offering price less the underwriting discount to cover any overallotments.

, 2018

Gilford Securities Incorporated

Prospectus dated _______ , 2013

TABLE OF CONTENTS

You should rely only on the information contained in this prospectus or any related prospectus supplement. We have not authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. The information contained in this prospectus or incorporated by reference herein is accurate only on the date of this prospectus. Our business, financial condition, results of operations and prospects may have changed since such date. Other than as required under the federal securities laws, we undertake no obligation to publicly update or revise such information, whether as a result of new information, future events or any other reason.

This prospectus is not an offer to sell, nor is it an offer to buy, these securities in any jurisdiction where the offer or sale is not permitted.

Until           ____, 2013,, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as Underwriterunderwriters and with respect to their unsold allotments or subscriptions.

_______________GLOSSARY OF CERTAIN SCIENTIFIC TERMS

This prospectus contains statistical data, estimatesThe medical and forecasts that are based on independent industry publications, other publicly available information and information based on our internal sources.

Neither we, the selling stockholders, nor the Underwriter have authorized anyone to provide you with information or to make any representations other than those containedscientific terms used in this prospectus orhave the following meanings:

“Active Metabolite” means a drug that is metabolized by the body into a modified form which continues to produce effects in any free writing prospectuses we have prepared. We take no responsibilitythe body.

“cGCP” is current Good Clinical Practices. The FDA and other regulatory agencies promulgate regulations and standards, commonly referred to as current Good Clinical Practices, for designing, conducting, monitoring, auditing and provide noreporting the results of clinical trials to ensure that the data and results are accurate and that the rights and welfare of trial participants are adequately protected.

“cGMP” is current Good Manufacturing Practices. The FDA and other regulatory agencies promulgate regulations and standards, commonly referred to as current Good Manufacturing Practices, which include requirements relating to quality control and quality assurance, as towell as the reliabilitycorresponding maintenance of any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstancesrecords and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date

documentation.

“CRO” means a Contract Research Organization.

“EMA” means the European Medicines Agency.

“FDA” means the Food and Drug Administration.

“IND” means an Investigational New Drug Application. Before testing a new drug on human subjects, the company must file an IND with the FDA. Information must be produced on the absorption, distribution, metabolism, and excretion properties of the drug and detailed protocols for testing on human subjects must be submitted.

“IPR&D” means In-Process Research and Development.

“NDA” means a New Drug Application submitted to the FDA. Under the Food, Drug, and Cosmetic Act of 1938, an NDA is submitted to the FDA enumerating the uses of the drug and providing evidence of its safety.

“NL” means Necrobiosis Lipoidica, a chronic, disfiguring condition.

“Osteonecrosis” means the death of bone cells due to decreased blood flow. It can lead to pain and collapse of areas of bone.

“RIF” means Radiation-Induced Fibrosis, a side effect of external beam radiation therapy for the treatment of cancer.

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

The following table sets forth our summary historical consolidated financial data for the periods presented below. The summary consolidated financial data as of December 31, 2017 and 2016 and for each of the years in the two-year period ended December 31, 2017 have been derived from our audited consolidated financial statements included herein. The summary unaudited condensed consolidated financial data as of March 31, 2018 and the three-month period ended March 31, 2018 has been derived from our unaudited condensed consolidated financial statements included herein.

Our historical results are not necessarily indicative of the results of operations for future periods. You should read the following summary consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and our consolidated financial statements and the related notes included elsewhere in this prospectus.

RISK FACTORS

An investment in our securities involves a high degree of risk. You should carefully consider the risks described below before purchasing any of the Shares. If any of the following Decemberrisks actually occur, our business, financial condition, or results of operations could be materially adversely affected, the trading price of our common stock could decline, and you may lose all or part of your investment. You should acquire the shares to which this prospectus relates only if you can afford to lose your entire investment. You should also refer to the other information contained in this prospectus, including our consolidated financial statements and the notes to those statements, and the information set forth under the caption “Cautionary Note Regarding Forward-Looking Statements.” The risks described below and contained in our other periodic reports are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business operations.

Risks Related to Our Financial Position and Need for Capital

We have a history of losses and we may never become profitable.

We are a clinical stage biopharmaceutical company with a limited operating history. Processa, itself as an organization, has never had a drug approved by the FDA or any regulatory agency. The likelihood of success of our business plan must be considered in light of the challenges, substantial expenses, difficulties, complications and delays frequently encountered in connection with developing and expanding early-stage businesses and the regulatory and competitive environment in which we operate. Biopharmaceutical product development is a highly speculative undertaking, involves a substantial degree of risk, and is a capital-intensive business. If we cannot successfully execute our plan to develop our pipeline of drug(s), our business may not succeed.

Promet Therapeutics, LLC, whose assets were acquired by Processa, had an accumulated deficit of $3.253 million incurred since its inception on August 31, 2015 through the date of acquisition on October 4, 2017. Subsequent to the date of acquisition, the accumulated deficit increased to approximately $5.0 million at March 31, 2018. The Company will incur additional losses as we continue our research and development activities, seek regulatory approvals for our product candidates and engage in clinical trials. These losses will cause, among other things, our stockholders’ equity and working capital to decrease. Any future earnings and cash flow from operations of our business are dependent on our ability to further develop our products and on revenues and profitability from sales of products or successful joint venture relationships.

There can be no assurance that we will be able to generate sufficient product revenue to become profitable at all or on a sustained basis. Even if we generate revenues, we expect to have quarter-to-quarter fluctuations in revenues and expenses, some of which could be significant, due to research, development, clinical trial, and marketing and manufacturing expenses and activities. We also expect to incur substantial expenses without corresponding revenues, unless and until we are able to obtain regulatory approval and successfully license or commercialize our product candidates. If our product candidates fail in clinical trials or do not gain regulatory approval, or if our products do not achieve market acceptance, we may never become profitable.

We may never be able to obtain regulatory approval for the marketing of our product candidates in any indication in the United States or internationally. As we commercialize and market products, we will need to incur expenses for product marketing and brand awareness and conduct significant research, development, testing and regulatory compliance activities that, together with general and administrative expenses, could result in substantial operating losses for the foreseeable future. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual gross revenues equalbasis. Our stock price may decline, and you may lose all or exceed $1 billion,a substantial part of your investment in us.

We will require additional financing.

We will require substantial additional capital in the future to further our development and license of our current and any additional products. We have historically relied upon private investments to fund our operations. Delays in obtaining additional funding could adversely affect our ability to move forward with additional studies or in licensing activities.

Substantial doubt existed at the time of filing of our annual report on Form 10-K for the year ended December 31, 2017 and our quarterly report on Form 10-Q for the three months ended March 31, 2018 about the Company’s ability to continue as a going concern. Our ability to obtain additional financing will be subject to a number of factors, including market conditions, our operating performance and investor sentiment. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates, restrict our operations or obtain funds by entering into agreements on unattractive terms, which would ceaselikely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained. If we do not have sufficient funds to continue operations, we could be an emerging growth companyrequired to seek bankruptcy protection or other alternatives that would likely result in our stockholders losing some or all of their investment in us.

We do not have any credit facilities as a source of future funds, and there can be no assurance that we will be able to raise sufficient additional capital on acceptable terms, or at all. We may seek additional capital through a combination of private and public equity offerings, debt financings and strategic collaborations. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, could increase our expenses and require that our assets secure such debt. Moreover, any debt we incur must be repaid regardless of our operating results. If we choose to pursue additional indications and/or geographies for our product candidates, in-license additional development assets, or otherwise expand more rapidly than we presently anticipate, we may also need to raise additional capital sooner than expected.

Risks Relating to Clinical Development and Commercialization of Our Product Candidates

We currently do not have, and may never develop, any FDA-approved, licensed or commercialized products.

We have not yet sought to obtain any regulatory approvals for any product candidates in the United States or in any foreign market. For us to develop any products that might be licensed or commercialized, we will have to invest further time and capital in research and product development, regulatory compliance and market development. Therefore, we and our licensor(s), prospective business partners and other collaborators may never develop any products that can be licensed or commercialized. All of our development efforts will require substantial additional funding, none of which may result in any revenue.

We depend entirely on the last daysuccessful development of our product candidates, which have not yet demonstrated efficacy for their target indications in clinical trials. We may never be able to demonstrate efficacy for our product candidates, thus preventing us from licensing, obtaining marketing approval by any regulatory agency, and/or commercializing our product(s).

Our product candidates are either in the early stages of clinical development or late stages of preclinical development. Significant additional research and development activity and clinical testing are required before we will have a chance to achieve a viable product for licensing or commercialization from such candidates. Our research and development efforts remain subject to all the risks associated with the development of new biopharmaceutical products and treatments. Development of the yearunderlying technology may be affected by unanticipated technical or other problems, among other research and development issues, and the possible insufficiency of funds needed in order to complete development of these product candidates. Safety, regulatory and efficacy issues, clinical hurdles or other challenges may result in delays and cause us to incur additional expenses that would increase our losses. If we and our collaborators cannot complete, or if we experience significant delays in developing, our potential therapeutics or products for use in potential commercial applications, particularly after incurring significant expenditures, our business may fail, and investors may lose the entirety of their investment.

When we submit an IND or foreign equivalent to the FDA or international regulatory authorities seeking approval to initiate clinical trials in the United States and other countries, we may not be successful in obtaining acceptance from the FDA or comparable foreign regulatory authorities to start our clinical trials. If we do not obtain such acceptance, the time in which we expect to commence clinical programs for any product candidate will be extended and such extension will increase our expenses and increase our need for additional capital. Moreover, there is no guarantee that occurs.our clinical trials will be successful or that we will continue clinical development in support of an approval from the FDA or comparable foreign regulatory authorities for any indication. We note that most drug candidates never reach the clinical development stage and even those that do commence clinical development have only a small chance of successfully completing clinical development and gaining regulatory approval. Therefore, our business currently depends entirely on the successful development, regulatory approval, and licensing or commercialization of our product candidates, which may never occur.

We must successfully complete clinical trials for our product candidates before we can apply for marketing approval.

Even if we complete our clinical trials, it does not assure marketing approval. Our clinical trials may be unsuccessful, which would materially harm our business. Even if our initial clinical trials are successful, we are required to conduct additional clinical trials to establish our product candidates’ safety and efficacy, before a NDA. Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to outcome. Success in early phases of pre-clinical and clinical trials does not ensure that later clinical trials will be successful, and interim results of a clinical trial do not necessarily predict final results. A failure of one or more of our clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize our product candidates. The research, testing, manufacturing, labeling, packaging, storage, approval, sale, marketing, advertising and promotion, pricing, export, import and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, which regulations differ from country to country.

We are not permitted to market our product candidates as prescription pharmaceutical products in the United States until we receive approval of an NDA from the FDA, or in any foreign countries until we receive the requisite approval from such countries. In the United States, the FDA generally requires the completion of clinical trials of each drug to establish its safety and efficacy and extensive pharmaceutical development to ensure its quality before an NDA is approved. Regulatory authorities in other jurisdictions impose similar requirements. Of the large number of drugs in development, only a small percentage result in the submission of an NDA to the FDA and even fewer are eventually approved for commercialization. If our development efforts for our product candidates, including regulatory approval, are not successful for their planned indications, or if adequate demand for our product candidates is not generated, our business will be materially adversely affected.

We cannot guarantee that regulators will agree with our assessment of the results of the clinical trials we intend to conduct in the future or that such trials will be successful. The FDA, EMA and other regulators have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional clinical trials, or pre-clinical or other studies. In addition, varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory approval of our product candidates.

We have no corporate history of conducting clinical trials. Our planned clinical trials or those of our collaborators may reveal significant adverse events, toxicities or other side effects not seen in our preclinical studies and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates

Our operations to date have been limited to financing and staffing the Company, conducting research and developing our core technologies, and identifying and optimizing our lead product clinical candidates. Although we have recruited a team that has experience with clinical trials in the United States and outside the United States, as a company, we have no corporate experience conducting clinical trials in any jurisdiction and have not had previous experience commercializing product candidates or submitting an investigational new drug application or any Application to the FDA or similar submissions to initiate clinical trials or obtain marketing authorization to foreign regulatory authorities. We cannot be certain that planned clinical trials will begin or be completed on time, if at all, that our planned development programs would be acceptable to the FDA or other regulatory authorities, or that, if regulatory approval is obtained, our product candidates can be successfully commercialized. Clinical trials and commercializing our product candidates will require significant additional financial and management resources, and reliance on third-party clinical investigators, contract research organizations (“CROs”), consultants and collaborators. Relying on third-party clinical investigators, CROs or collaborators may result in delays that are outside of our control.

Furthermore, we may not have the financial resources to continue development of, or to enter into collaborations for, a product candidate if we experience any problems or other unforeseen events that delay or prevent regulatory approval of, or our ability to commercialize, product candidates.

In order to obtain marketing approval for any of our product candidates, we must demonstrate the safety and efficacy of the product candidate for the relevant clinical indication or indications through preclinical studies and clinical trials as well as additional supporting data. If our product candidates are associated with undesirable side effects in preclinical studies or clinical trials or have characteristics that are unexpected, we may need to interrupt, delay or abandon their development or limit development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.

Although CoNCERT Pharmaceuticals had dosed our drug product in healthy human volunteers and diabetic nephropathy patients, we have not yet initiated any clinical trials or dosed any of our product candidates in the targeted population of patients. Preclinical studies of our product candidates have been completed, but we do not know the predictive value of these studies for our targeted population of patients, and we cannot guarantee that any positive results in preclinical studies will translate successfully to our targeted population of patients. It is not uncommon to observe results in human clinical trials that are unexpected based on preclinical testing, and many product candidates fail in clinical trials despite promising preclinical results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products. Human patients in clinical trials may suffer significant adverse events or other side effects not observed in our preclinical studies, including, but not limited to, immunogenic responses, organ toxicities such as liver, heart or kidney or other tolerability issues or possibly even death. The observed potency and kinetics of our planned product candidates in preclinical studies may not be observed in human clinical trials. If clinical trials of our planned product candidates fail to demonstrate efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our planned product candidates which may result in complete loss of expenditures which we devote to those products.

If significant adverse events or other side effects are observed in any of our future clinical trials, we may have difficulty recruiting patients to the clinical trial, patients may drop out of our trial, or we may be required to abandon the trial or our development efforts of that product candidate altogether. We, the FDA or other applicable regulatory authorities, or an Institutional Review Board (“IRB”) may suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects in such trials are being exposed to unacceptable health risks or adverse side effects. Some potential therapeutics developed in the biotechnology industry that initially showed therapeutic promise in early-stage studies have later been found to cause side effects that prevented their further development. Even if the side effects do not preclude the drug from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance of the approved product due to its tolerability versus other therapies. Any of these developments could materially harm our business, financial condition and prospects.

Further, if any of our product candidates obtains marketing approval, toxicities associated with our product candidates may also develop after such approval and lead to a requirement to conduct additional clinical safety trials, additional warnings being added to the labeling, significant restrictions on the use of the product or the withdrawal of the product from the market. We cannot predict whether our product candidates will cause toxicities in humans that would preclude or lead to the revocation of regulatory approval based on preclinical studies or early stage clinical testing. However, any such event, were it to occur, would cause substantial harm to our business and financial condition and would result in the diversion of our management’s attention.

Even if investors will findwe receive regulatory approval for any of our common stock less attractive becauseproduct candidates, we may relynot be able to successfully license or commercialize the product and the revenue that we generate from its sales, if any, may be limited.

If approved for marketing, the commercial success of our product candidates will depend upon each product’s acceptance by the medical community (including physicians, patients and health care payors) and the potential competitive products available to the patients upon commercialization. The degree of market acceptance for any of our product candidates will depend on a number of factors, including:

If any of our product candidates are approved, but do not achieve an adequate level of acceptance by physicians, health care payors, and patients, we may not generate sufficient revenue and we may not be able to achieve or sustain profitability. Our efforts to educate the medical community and third-party payors on the exemptions from certain reporting standards as an emerging growth company. If some investors findbenefits of our common stock less attractive, thereproduct candidates may require significant resources and may never be successful.

In addition, even if we obtain regulatory approvals, the timing or scope of any approvals may prohibit or reduce our ability to commercialize our product candidates successfully. For example, if the approval process takes too long, we may miss market opportunities and give other companies the ability to develop competing products or establish market dominance. Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render our product candidates not commercially viable. For example, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for any of our product candidates, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve any of our product candidates with a less active trading marketlabel that does not include the labeling claims necessary or desirable for the successful commercialization of that indication.

Even if we obtain marketing approval for any of our product candidates, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense.

Even if we obtain regulatory approval for any of our product candidates for an indication, the FDA or foreign equivalent may still impose significant restrictions on their indicated uses or marketing or the conditions of approval or impose ongoing requirements for potentially costly and time-consuming post-approval studies, including Phase 4 clinical trials, and post-market surveillance to monitor safety and efficacy. Our product candidates will also be subject to ongoing regulatory requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, recordkeeping and reporting of adverse events and other post-market information. These requirements include registration with the FDA, as well as continued compliance with current Good Clinical Practices regulations, or cGCPs, for any clinical trials that we conduct post-approval. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP, or current Good Manufacturing Practices regulations, requirements relating to quality control, quality assurance and corresponding maintenance of records and documents.

The FDA has the authority to require a risk evaluation and mitigation strategy, or REMS, as part of an NDA or after approval, which may impose further requirements or restrictions on the distribution or use or marketing of an approved drug, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain safe-use criteria or requiring patient testing, monitoring and/or enrollment in a registry. Any of these requirements or restrictions on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of our product candidates. Moreover, product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following the initial marketing of the product. Any of the foregoing scenarios could materially harm the commercial success of our product candidates.

With respect to sales and marketing activities by us or any future partner, advertising and promotional materials must comply with FDA rules in addition to other applicable federal, state and local laws in the United States and similar legal requirements in other countries. In the United States, the distribution of product samples to physicians must comply with the requirements of the U.S. Prescription Drug Marketing Act. Application holders must obtain FDA approval for product and manufacturing changes, depending on the nature of the change. We may also be subject, directly or indirectly through our customers and partners, to various fraud and abuse laws, including, without limitation, the U.S. Anti-Kickback Statute, U.S. False Claims Act, and similar state laws, which impact, among other things, our proposed sales, marketing, and scientific/educational grant programs. If we participate in the U.S. Medicaid Drug Rebate Program, the Federal Supply Schedule of the U.S. Department of Veterans Affairs, or other government drug programs, we will be subject to complex laws and regulations regarding reporting and payment obligations. All of these activities are also potentially subject to U.S. federal and state consumer protection and unfair competition laws. Similar requirements exist in many of these areas in other countries.

In addition, if any of our product candidates are approved for a particular indication, our product labeling, advertising and promotion would be subject to regulatory requirements and continuing regulatory review. The FDA strictly regulates the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. If we receive marketing approval for our common stock,product candidates, physicians may nevertheless legally prescribe our products to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability and our stock pricegovernment fines. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be more volatilesubject to significant sanctions. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified promotional conduct is changed or decline.curtailed.

If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, problems with the facility where the product is manufactured, or we or our manufacturers fail to comply with applicable regulatory requirements, we may be subject to various administrative or judicial sanctions, such as issuance of warning letters, withdrawal of the product from the market, injections or the imposition of civil or criminal penalties or monetary fines, suspension of any ongoing new clinical trials or suspension or withdrawal of regulatory approval.

The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate revenue. Adverse regulatory action, whether pre- or post-approval, can also potentially lead to product liability claims and increase our product liability exposure.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials, as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In addition, asmany jurisdictions outside the United States, a “Smaller Reporting Company,”product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we enjoyintend to charge for our products is also subject to approval.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the same exemptions as “emerging growth companies,” and those exemptions would continue to be available to us even after the emerging growth company status expires if we still are a smaller reporting company at such time.

introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/ or to receive applicable marketing approvals, our public company obligations,target market will be reduced and our investorsability to realize the full market potential of our product candidates will be harmed.

Recently enacted and future legislation may lose confidenceincrease the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval for our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell our product candidates. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

We could face competition from other biotechnology and pharmaceutical companies, and our operating results would suffer if we fail to innovate and compete effectively.

Our products are used for indications where we believe that there is an unmet medical need. If existing or newly approved drug products, whether approved by the FDA for the indication or not approved, are able to successfully treat the same patients, it may be more difficult to perform clinical studies, to develop our product and/or to commercialize our product, adversely affecting the Processa business. Since the biopharmaceutical industry is characterized by intense competition and rapid innovation, our competitors may be able to develop other compounds or drugs that are able to achieve similar or better results than our product candidates. Our competitors may include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, and universities and other research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as a larger research and development staff and experienced marketing and manufacturing organizations, established relationships with CROs and other collaborators, as well as established sales forces. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Mergers and acquisitions in the Company,biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances in the market pricecommercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors, either alone or with collaborative partners, may succeed in developing, acquiring or licensing on an exclusive basis drug or biologic products that are more effective, safer, more easily commercialized or less costly than our product candidates or may develop proprietary technologies or secure patent protection and, in turn, exclude us from technologies that we may need for the development of our common stocktechnologies and warrantspotential products.

Even if we obtain regulatory approval of any of our product candidates, we may not be the first to market and that may negatively affect the price or demand for our product candidates. Additionally, we may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment to our product candidates, or if physicians switch to other new drug or biologic products or choose to reserve our product candidates for use in limited circumstances. Furthermore, for drugs that receive orphan drug designation at the FDA, a competitor could obtain orphan product approval from the FDA with respect to such competitor’s drug product. If such competitor drug product is determined to be the same product as one of our product candidates, we may be prevented from obtaining approval from the FDA for such product candidate for the same indication for seven years, except in limited circumstances, and we may be subject to similar restrictions under non-U.S. regulations.

We are completely dependent on third parties to manufacture our product candidates, and our commercialization of our product candidates could be negatively affected, and investigations by stock exchange/halted, delayed or made less profitable if those third parties fail to obtain manufacturing approval from the FDA or comparable foreign regulatory agencies could commence requiring additional management and financial resources.authorities, fail to provide us with sufficient quantities of our product candidates or fail to do so at acceptable quality levels or prices.

New accounting pronouncements may impactWe do not currently have, nor do we plan to acquire, the capability or infrastructure to manufacture the active pharmaceutical ingredient, or API, in our reported resultsproduct candidates for use in our clinical trials or for commercial product. In addition, we do not have the capability to formulate any of operations and financial position.

The JOBS Act provides that an emerging growth company can take advantage of an extended transition period provided in Section 7(a)(2)(B) of the Securities Actour product candidates into a finished drug product 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. However, we are choosing to opt out of such extended transition period, and ascommercial distribution. As a result, we will be obligated to rely on contract manufacturers, if and when any of our product candidates are approved for commercialization. We have not entered into an agreement with any contract manufacturers for commercial supply and may not be able to engage a contract manufacturer for commercial supply of any of our product candidates on favorable terms to us, or at all.

The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA or comparable foreign regulatory authorities pursuant to inspections that will be conducted after we submit an NDA or biologics license application to the FDA or their equivalents to other relevant regulatory authorities. We will not control the manufacturing process of, and will be completely dependent on, our contract manufacturing partners for compliance with cGMPs for manufacture of both active drug substances and finished drug products. These cGMP regulations cover all aspects of the manufacturing, testing, quality control and record keeping relating to our product candidates. If our contract manufacturers do not successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

Our contract manufacturers will be subject to ongoing periodic unannounced inspections by the FDA and corresponding state and foreign agencies for compliance with cGMPs and similar regulatory requirements. We will not have control over our contract manufacturers’ compliance with these regulations and standards. Failure by any of our contract manufacturers to comply with newapplicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure to grant approval to market any of our product candidates, delays, suspensions or revised accountingwithdrawals of approvals, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business. In addition, we will not have control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. Failure by our contract manufacturers to comply with or maintain any of these standards oncould adversely affect our ability to develop, obtain regulatory approval for or market any of our product candidates.

If, for any reason, these third parties are unable or unwilling to perform, we may not be able to terminate our agreements with them, and we may not be able to locate alternative manufacturers or formulators or enter into favorable agreements with them and we cannot be certain that any such third parties will have the relevant dates on which adoptionmanufacturing capacity to meet future requirements. If these manufacturers or any alternate manufacturer of such standards isfinished drug product experiences any significant difficulties in its respective manufacturing processes for our API or finished products or should cease doing business with us, we could experience significant interruptions in the supply of any of our product candidates or may not be able to create a supply of our product candidates at all. Were we to encounter manufacturing issues, our ability to produce a sufficient supply of any of our product candidates might be negatively affected. Our inability to coordinate the efforts of our third-party manufacturing partners, or the lack of capacity available at our third-party manufacturing partners, could impair our ability to supply any of our product candidates at required for non-emerging growth companies. Our decision to opt outlevels. Because of the extended transition period for complyingsignificant regulatory requirements that we would need to satisfy in order to qualify a new bulk or finished product manufacturer, if we face these or other difficulties with newour current manufacturing partners, we could experience significant interruptions in the supply of any of our product candidates if we decided to transfer the manufacture of any of our product candidates to one or revised accounting standards is irrevocable. U.S. generally accepted accounting principles, or GAAP, and related implementation guidelines and interpretations can be highly complex and involve subjective judgments. Changesmore alternative manufacturers in these rules or their interpretation,an effort to deal with the adoption of new pronouncementsdifficulties.

Any manufacturing problem or the applicationloss of existing pronouncementsa contract manufacturer could be disruptive to changesour operations and result in lost sales. Additionally, we rely on third parties to supply the raw materials needed to manufacture our potential products. Any reliance on suppliers may involve several risks, including a potential inability to obtain critical materials and reduced control over production costs, delivery schedules, reliability and quality. Any unanticipated disruption to a future contract manufacturer caused by problems at suppliers could delay shipment of any of our product candidates, increase our cost of goods sold and result in lost sales.

We cannot guarantee that our future manufacturing and supply partners will be able to reduce the costs of commercial scale manufacturing of any of our product candidates over time. If the commercial-scale manufacturing costs of any of our product candidates are higher than expected, these costs may significantly impact our operating results. In order to reduce costs, we may need to develop and implement process improvements. However, in order to do so, we will need, from time to time, to notify or make submissions with regulatory authorities, and the improvements may be subject to approval by such regulatory authorities. We cannot be sure that we will receive these necessary approvals or that these approvals will be granted in a timely fashion. We also cannot guarantee that we will be able to enhance and optimize output in our commercial manufacturing process. If we cannot enhance and optimize output, we may not be able to reduce our costs over time.

We expect to rely on third parties to conduct clinical trials for our product candidates. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize any of our product candidates and our business would be substantially harmed.

We expect to enter into agreements with third-party CROs to conduct and manage our clinical programs including contracting with clinical sites to perform our clinical studies. We plan to rely heavily on these parties for execution of clinical studies for our product candidates and will control only certain aspects of their activities. Nevertheless, we will be responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on CROs and clinical sites will not relieve us of our regulatory responsibilities. We and our CROs will be required to comply with cGCPs, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for any products in clinical development. The FDA and its foreign equivalents enforce these cGCP regulations through periodic inspections of trial sponsors, principal investigators and trial sites. If we or our CROs fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA or other regulatory authorities will determine that any of our clinical trials comply with cGCPs. In addition, our clinical trials must be conducted with products produced under cGMP regulations and will require a large number of test subjects. Our failure or the failure of our CROs or clinical sites to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action up to and including civil and criminal penalties.

Although we intend to design the clinical trials for our product candidates in consultation with CROs, we expect that the CROs will manage all of the clinical trials conducted at contracted clinical sites. As a result, many important aspects of our drug development programs would be outside of our direct control. In addition, the CROs and clinical sites may not perform all of their obligations under arrangements with us or in compliance with regulatory requirements. If the CROs or clinical sites do not perform clinical trials in a satisfactory manner, breach their obligations to us or fail to comply with regulatory requirements, the development and commercialization of any of our product candidates for the subject indication may be delayed or our development program materially and irreversibly harmed. We cannot control the amount and timing of resources these CROs and clinical sites will devote to our program or any of our product candidates. If we are unable to rely on clinical data collected by our CROs, we could be required to repeat, extend the duration of, or increase the size of our clinical trials, which could significantly alterdelay commercialization and require significantly greater expenditures.

If any of our reportedrelationships with these third-party CROs or clinical sites terminate, we may not be able to enter into arrangements with alternative CROs or clinical sites. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any such clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our financial statementsresults and the commercial prospects for any of our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of operations.earlier studies and trials may not be predictive of future trial results.

Clinical testing of drug product candidates is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of pre-clinical studies and early clinical trials may not be predictive of the results of later-stage clinical trials. We cannot assure you that the FDA or comparable foreign regulatory authorities will view the results as we do or that any future trials of any of our product candidates will achieve positive results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Any future clinical trial results for our product candidates may not be successful.

- 11 -In addition, a number of factors could contribute to a lack of favorable safety and efficacy results for any of our product candidates. For example, such trials could result in increased variability due to varying site characteristics, such as local standards of care, differences in evaluation period and surgical technique, and due to varying patient characteristics including demographic factors and health status.

Even though we may apply for orphan drug designation for a product candidate, we may not be able to obtain orphan drug marketing exclusivity.

There is no guarantee that the FDA, EMA or their foreign equivalents will grant any future application for orphan drug designation for any of our product candidates, which would make us ineligible for the additional exclusivity and other benefits of orphan drug designation.

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making a drug available in the Unites States for this type of disease or condition will be recovered from sales of the product. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan product designation does not convey any advantage in or shorten the duration of regulatory review and approval process. In addition to the potential period of exclusivity, orphan designation makes a company eligible for grant funding of up to $400,000 per year for four years to defray costs of clinical trial expenses, tax credits for clinical research expenses and potential exemption from the FDA application user fee.

If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other applications to market the same drug for the same indication for seven years, except in limited circumstances, such as (i) the drug’s orphan designation is revoked; (ii) its marketing approval is withdrawn; (iii) the orphan exclusivity holder consents to the approval of another applicant’s product; (iv) the orphan exclusivity holder is unable to assure the availability of a sufficient quantity of drug; or (v) a showing of clinical superiority to the product with orphan exclusivity by a competitor product. If a drug designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan drug exclusivity. There can be no assurance that we will receive orphan drug designation for any of our product candidates in the indications for which we think they might qualify, if we elect to seek such applications.

Although we may pursue expedited regulatory approval pathways for a product candidate, it may not qualify for expedited development or, if it does qualify for expedited development, it may not actually lead to a faster development or regulatory review or approval process.

Although we believe there may be an opportunity to accelerate the development of certain of our product candidates through one or more of the FDA’s expedited programs, such as fast track, breakthrough therapy, accelerated approval or priority review, we cannot be assured that any of our product candidates will qualify for such programs.

For example, a drug may be eligible for designation as a breakthrough therapy if the drug is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. Although breakthrough designation or access to any other expedited program may expedite the development or approval process, it does not change the standards for approval. If we apply for breakthrough therapy designation or any other expedited program for our product candidates, the FDA may determine that our proposed target indication or other aspects of our clinical development plans do not qualify for such expedited program. Even if we are successful in obtaining a breakthrough therapy designation or access to any other expedited program, we may not experience faster development timelines or achieve faster review or approval compared to conventional FDA procedures. Access to an expedited program may also be withdrawn by the FDA if it believes that the designation is no longer supported by data from our clinical development program. Additionally, qualification for any expedited review procedure does not ensure that we will ultimately obtain regulatory approval for such product candidate.

Third-party coverage and reimbursement and health care cost containment initiatives and treatment guidelines may constrain our future revenues.

Our ability to successfully market our product candidates will depend in part on the level of reimbursement that government health administration authorities, private health coverage insurers and other organizations provide for the cost of our products and related treatments. Countries in which any of our product candidates are sold through reimbursement schemes under national health insurance programs frequently require that manufacturers and sellers of pharmaceutical products obtain governmental approval of initial prices and any subsequent price increases. In certain countries, including the United States, government-funded and private medical care plans can exert significant indirect pressure on prices. We may not be able to sell our product candidates profitably if adequate prices are not approved or coverage and reimbursement is unavailable or limited in scope. Increasingly, third-party payors attempt to contain health care costs in ways that are likely to impact our development of products including:

Risks RelatedRelating to Our Intellectual Property Rights

We depend on rights to certain pharmaceutical compounds that are or will be licensed to us. We do not control these pharmaceutical compounds and any loss of our rights to them could prevent us from selling our products.

Within our present pipeline and potentially future pipeline of drugs, our drugs are in-licensed from other biotech or pharmaceutical companies. We do not own the patents that underlie these licenses. Our rights to use the pharmaceutical compounds we license are subject to the negotiation of, continuation of and compliance with the terms of those licenses. Thus, these patents and patent applications are not written by us or our attorneys, and we did not have control over the drafting and prosecution. The former patent owners and our licensors might not have given the same attention to the drafting and prosecution of these patents and applications as we would have if we had been the owners of the patents and applications and had control over the drafting. Moreover, under certain of our licenses, patent prosecution activities remain under the control of the licensor. We cannot be certain that drafting of the licensed patents and patent applications, or patent prosecution, by the licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights.

Our rights to develop and commercialize the product candidates we license are subject to the validity of the owner’s intellectual property rights. Enforcement of our licensed patents or defense or any claims asserting the invalidity of these patents is often subject to the control or cooperation of our licensors. Legal action could be initiated against the owners of the intellectual property that we license and an adverse outcome in such legal action could harm our business because it might prevent such companies or institutions from continuing to license intellectual property that we may need to operate our business. In addition, such licensors may resolve such litigation in a way that benefits them but adversely affects our ability to develop and commercialize our product candidates.

In addition, our rights to practice the inventions claimed in the licensed patents and patent applications are subject to our Common Stocklicensors abiding by the terms of those licenses and Warrants:

The exercisenot terminating them. Our licenses may be terminated by the licensor if we are in material breach of certain terms or conditions of the license agreement or in certain other circumstances. Certain of our warrantslicenses contained in our agreements with CoNCERT Pharmaceuticals contain provisions that allow the licensor to terminate the license if (i) we breach any payment obligation or other material provision under the agreement and options may result infail to cure the breach within a dilutionfixed time following written notice of termination, (ii) we or any of our current stockholders' voting power and an increase inaffiliates, licensees or sublicensees directly or indirectly challenge the numbervalidity, enforceability, or extension of shares eligible for future resale inany of the public market which may negatively impactlicensed patents, or (iii) we declare bankruptcy or dissolve. Our rights under the trading pricelicenses are subject to our continued compliance with the terms of our sharesthe license, including the payment of common stock and warrants.

The exerciseroyalties due under the license. Termination of these licenses could prevent us from marketing some or all of our outstanding warrants and options could significantly diluteproducts. Because of the ownership interestscomplexity of our existing stockholders.   Atproducts and the effective date of this offering,patents we anticipate having outstanding warrants to purchase an aggregate of 1,012,500 shares of common stock, including (i)have licensed, determining the warrant to purchase 150,000 shares of common stock issued to the Underwriter in connection with this offering and (ii) the warrants to purchase 862,500 shares of common stock at an exercise price of $5.15 per share issued pursuant to this offering (including 112,500 warrants issued pursuant to the Underwriter’s overallotment option).  Additionally, the issuance of up to 1,022,000 shares of common stock upon exercise of stock options and 1,440,000 performance stock options outstanding as of April 8, 2013 will further dilute our existing stockholders’ voting interest.  To the extent warrants and/or options are exercised, additional shares of common stock will be issued, and such issuance will dilute existing stockholders.  Please see the section in this prospectus entitled “Dilution” for a tabular discussionscope of the theoretical impact of the warrants issued in this offeringlicense and related royalty obligations can be difficult and can lead to disputes between us and the effectslicensor. An unfavorable resolution of the issuance of shares underlying such warrants on existing stockholders’ economic and percentage ownership.

In addition to the dilutive effects described above, the exercise of those securities woulda dispute could lead to an increase in the royalties payable pursuant to the license. If a licensor believed we were not paying the royalties due under the license or were otherwise not in compliance with the terms of the license, the licensor might attempt to revoke the license. If such an attempt were successful, we might be barred from producing and selling some or all of our products.

It is difficult and costly to protect our intellectual property rights, and we cannot ensure the protection of these rights.

Our commercial success will depend, in part, on obtaining and maintaining patent protection for our technologies, products and processes, successfully defending these patents against third-party challenges and successfully enforcing these patents against third party competitors. The patent positions of pharmaceutical companies can be highly uncertain and involve complex legal, scientific and factual questions for which important legal principles remain unresolved. Changes in either the patent laws or in interpretations of patent laws may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowable or enforceable in our patents. The existing patent and patent applications relating to our product candidates and related technologies may be challenged, invalidated or circumvented by third parties and might not protect us against competitors with similar products or technologies.

The degree of future protection for our proprietary rights is uncertain, because legal means afford only limited protection and may not adequately protect our rights, permit us to gain or keep our competitive advantage, or provide us with any competitive advantage at all. For example, others have filed, and in the future are likely to file, patent applications covering products and technologies that are similar, identical or competitive to any of our product candidates, or important to our business. We cannot be certain that any patent application owned by a third party will not have priority over patent applications filed by us, or that we will not be involved in interference, opposition or invalidity proceedings before United States or foreign patent offices.

In the future we may rely on know-how and trade secrets to protect technology, especially in cases when we believe patent protection is not appropriate or obtainable. However, know-how and trade secrets are difficult to protect. While we intend to require employees, academic collaborators, consultants and other contractors to enter into confidentiality agreements, we may not be able to adequately protect our trade secrets or other proprietary or licensed information. Typically, research collaborators and scientific advisors have rights to publish data and information in which we may have rights. If we cannot maintain the confidentiality of our proprietary technology and other confidential information, our ability to receive patent protection and our ability to protect valuable information owned by us may be imperiled. Enforcing a claim that a third-party entity illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts are sometimes less willing to protect trade secrets than patents. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.

If we fail to obtain or maintain patent protection or trade secret protection for our product candidates or our technologies, third parties could use our proprietary information, which could impair our ability to compete in the market and adversely affect our ability to generate revenues and attain profitability.

We may also rely on the trademarks we may develop to distinguish our products from the products of our competitors. We cannot guarantee that any trademark applications filed by us or our business partners will be approved. Third parties may also oppose such trademark applications, or otherwise challenge our use of the trademarks. In the event that the trademarks we use are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources to advertising and marketing new brands. Further, we cannot provide assurance that competitors will not infringe the trademarks we use, or that we will have adequate resources to enforce these trademarks.

Our product candidates may infringe the intellectual property rights of others, which could increase our costs and delay or prevent our development and commercialization efforts.

Our success depends in part on avoiding infringement of the proprietary technologies of others. The pharmaceutical industry has been characterized by frequent litigation regarding patent and other intellectual property rights. Identification of third party patent rights that may be relevant to our proprietary technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. Additionally, because patent applications are maintained in secrecy until the application is published, we may be unaware of third-party patents that may be infringed by commercialization of any of our product candidates or any future product candidate. There may be certain issued patents and patent applications claiming subject matter that we may be required to license in order to research, develop or commercialize any of our product candidates, and we do not know if such patents and patent applications would be available to license on commercially reasonable terms, or at all. Any claims of patent infringement asserted by third parties would be time-consuming and may divert the time and attention of our technical personnel and management.

Third parties may hold proprietary rights that could prevent any of our product candidates from being marketed. Any patent-related legal action against us claiming damages and seeking to enjoin commercial activities relating to any of our product candidates or our processes could subject us to potential liability for damages and require us to obtain a license and pay royalties to continue to manufacture or market any of our product candidates or any future product candidates. We cannot predict whether we would prevail in any such actions or that any license required under any of these patents would be made available on commercially acceptable terms, if at all. In addition, we cannot be sure that we could redesign our product candidates or any future product candidates or processes to avoid infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the failure to obtain necessary licenses, could prevent us from developing and commercializing any of our product candidates or a future product candidate, which could harm our business, financial condition and operating results.

A number of shares eligible for resalecompanies, including several major pharmaceutical companies, have conducted, or are conducting, research within the therapeutic fields in which we intend to operate, which has resulted, or may result, in the public market. Salesfiling of many patent applications related to this research. If we were to challenge the validity of these or any issued United States patent in court, we would need to overcome a statutory presumption of validity that attaches to every issued United States patent. This means that, in order to prevail, we would have to present clear and convincing evidence as to the invalidity of the patent’s claims. If we were to challenge the validity of these or any issued United States patent in an administrative trial before the Patent Trial and Appeal Board in the United States Patent and Trademark Office, we would have to prove that the claims are unpatentable by a preponderance of the evidence. There is no assurance that a jury and/or court would find in our favor on questions of infringement, validity or enforceability.

General Company-Related Risks

We will need to grow the size of our organization, and we may experience difficulties in managing this growth.

We anticipate having a total of 15-20 full-time or part-time employees or consultants. In particular, we plan to add one main consultant to the development team and other consultants as needed; we also plan to add a CFO and finance/accounting staff. As our development and commercialization plans and strategies develop, we may need to expand the size of our employee and consultant/contractor base. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees. In addition, our management may have to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial numbersamount of time to managing these growth activities. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to:

We may not be able to accomplish these tasks, and our failure to accomplish any of them could harm our financial results.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face a potential risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any of our product candidates or any other future product. For example, we may be sued if any product we develop, including any of our product candidates, or any materials that we use in our products allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. In the US, claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. We intend to obtain product liability insurance covering our clinical trials. However, such insurance is expensive, difficult to obtain and may not be available in the future on acceptable terms, or at all. Although we will maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

Our limited operating history may make it difficult to evaluate our business and our future viability.

We are in the relatively early stage of operations and development and have only a limited operating history as the existing entity on which to base an evaluation of our business and prospects. Even if we successfully obtain additional funding, we are subject to the risks associated with early stage companies with a limited operating history, including: the need for additional financings; the uncertainty of research and development efforts resulting in successful commercial products, as well as the marketing and customer acceptance of such sharesproducts; unexpected issues with the FDA, other federal or state regulatory authorities or ex-US regulatory authorities; regulatory setbacks and delays; competition from larger organizations; reliance on the proprietary technology of others; dependence on key personnel; uncertain patent protection; fluctuations in expenses; and dependence on corporate partners and collaborators. Any failure to successfully address these risks and uncertainties could seriously harm our business and prospects. We may not succeed given the technological, marketing, strategic and competitive challenges we will face. The likelihood of our success must be considered in light of the expenses, difficulties, complications, problems and delays frequently encountered in connection with the growth of a new business, the continuing development of new drug technology, and the competitive and regulatory environment in which we operate or may choose to operate in the public marketfuture.

If we suffer negative publicity concerning the safety of our products in development, our sales may be harmed and we may be forced to withdraw such products.

If concerns should arise about the safety of any of our products that are being developed or marketed, regardless of whether or not such concerns have a basis in generally accepted science or peer-reviewed scientific research, such concerns could adversely affect the further development or market pricefor these products. Similarly, negative publicity could result in an increased number of product liability claims, whether or not these claims are supported by applicable law or covered by insurance.

If we lose key management personnel, or if we fail to recruit additional highly skilled personnel, our ability to identify and develop new or next generation product candidates will be impaired, could result in loss of markets or market share and could make us less competitive.

We are highly dependent upon the principal members of our shares. Substantial dilutionsmall management team and staff, including David Young, Pharm.D., Ph.D, our Chief Executive Officer, and Sian Bigora, Pharm.D., our Chief Development Officer. The employment of Drs. Young and Bigora may be terminated at any time by either us or Dr. Young or Dr. Bigora. The loss of any current or future team member could impair our ability to design, identify, and develop new intellectual property and product candidates and new scientific or product ideas. Additionally, if we lose the services of any of these persons, we would likely be forced to expend significant time and money in the pursuit of replacements, which may result in a delay in the development of our product candidates and the implementation of our business plan and plan of operations and diversion of our management’s attention. We can give no assurance that we could find satisfactory replacements for our current and future key scientific and management employees on terms that would not be unduly expensive or burdensome to us.

To induce valuable personnel to remain at our Company, in addition to salary and cash incentives, we expect that we will provide stock options, restricted stock units or other equity securities that vest over time upon approval of a plan by the Board of Directors. Despite our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment with us on short notice. Although we expect to have employment agreements with our key employees, these employment agreements may still allow these employees to leave our employment at any time, for or without cause. We do not maintain “key man” insurance policies on the lives of these individuals or the lives of any of our other employees. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level and senior managers as well as junior, mid-level and senior scientific and medical and scientific personnel.

There may be limitations on the effectiveness of our internal controls, and a failure of our control systems to prevent error or fraud may materially harm our company.

Proper systems of internal controls over financial accounting and disclosure are critical to the operation of a public company. As we are a start-up company, we may be unable to effectively establish such systems. This would leave us without the ability to reliably assimilate and compile financial information about our company and significantly impair our ability to prevent error and detect fraud, all of which would have a negative impact on our company from many perspectives.

Moreover, we do not expect that disclosure controls or internal control over financial reporting, even if established, will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Currently, we have material weaknesses relating to a lack of accounting staff to implement effective financial reporting, internal controls and disclosure controls. As a result of such internal control weakness, we experienced a cybersecurity breach that resulted in a fraud loss where the probability of recovery of the loss is remote. While we are taking steps to prevent these control weaknesses from reoccurring, we cannot provide assurance that we will be successful. We are in the early stages of operations and fund raising so we currently lack the financial resources necessary to implement an effective internal control system to prevent and/or a substantial increasedetect and correct material misstatements due to fraud or error. Our inability to implement an effective internal control system in the numberfuture to prevent and/or detect and correct material misstatements could have a material and adverse effect on our financial condition.

Risks Related to Ownership of common shares available for future resale may negatively impact the trading price of our shares of common stockOur Common Stock and warrants.This Offering

As a new investor, youYou will experience immediate and substantial dilution indilution.

Because the net tangible book value of your shares.

The initial public offering price per share of our units in this offering reflects a common stock value thatbeing offered is considerablysubstantially higher than the net tangible book value per share of our common stock.  Investors purchasingstock, you will suffer substantial dilution with respect to the common stock you purchase in this offering. Based on the public offering price of $2.65 per share, if you purchase shares of common stock and warrants in this offering, you will pay a price that substantially exceeds the value of our tangible assets after subtracting liabilities. As a result, investors will, as of December 31, 2012:

·

incursuffer immediate and substantial dilution of $4.45$2.68 per share of common stock, basedshare. See “Dilution” on the $5.15 allocation of the initial public offering price of $5.20 per unit to a share of common stock; andpage 24.

·

contribute 61% of the total amount invested to date to fundFuture capital raises may dilute our company basedexisting stockholders’ ownership and/or have other adverse effects on the $5.15 allocation of the initial public offering price of $5.20 per unit to a share of common stock, but will own only 15% of the outstanding shares of common stock after the offering.our operations.

Provisions in our third amended and restated certificate of incorporation, our amended and restated bylaws or Delaware law might discourage, delay or prevent a change-of-control of our company or changes in our management and, therefore, depress the trading price of our common stock and warrants.

Provisions of our third amended and restated certificate of incorporation, our amended and restated bylaws, or Delaware law may have the effect of deterring unsolicited takeovers or delaying or preventing a change-of-control of our company or changes in our management, including transactions in which our stockholders might otherwise receive a premium for their shares over then current market prices.  In addition, these provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interest. These provisions include:

·

advance notice requirements for stockholder proposals and nominations of directors;

·

the inability of stockholders to call special meetings; and

·

limitations on the ability of stockholders to remove directors without cause or amend our bylaws.

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The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of the Company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

We may seek toIf we raise additional funds, finance acquisitions or develop strategic relationships by issuing capital stock that would dilute your ownership. If these activities result in significant dilution, it may negatively impact the trading price of our shares of common stock and warrants.

We have financed our operations, and we expect to continue to finance our operations, acquisitions, if any, and the development of strategic relationships by issuing equity and/or convertible securities, which could significantly reduce theour existing stockholders’ percentage ownership of our existing stockholders.  Furthermore, any newly issuedwill be reduced, and these stockholders may experience substantial dilution. We may also issue equity securities could havethat provide for rights, preferences and privileges senior to those of our existing securities. Any issuances by us of equity securities may be at or below the prevailing market price of our stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of our stock and/or warrants to decline.  We may alsocommon stock. If we raise additional funds through the incurrence ofby issuing debt or the issuance or sale of other securities, or instrumentsthese debt securities would have rights senior to our common shares. The holders of any securities or instruments we may issue may have rights superior to the rights of our common stockholders. If we experience dilution from issuance of additional securities and we grant superior rights to new securities over common stockholders, it may negatively impact the trading price of our shares of common stock and warrants, and you may lose all or part of your investment.

An active, liquid and orderly trading market for our common stock and warrants may not develop and the trading pricethose of our common stock and warrantsthe terms of the debt securities issued could impose significant restrictions on our operations, including liens on our assets. If we raise additional funds through collaborations and licensing arrangements, we may be volatile. If an orderly trading market forrequired to relinquish some rights to our common stock and warrants does not develop and/technologies or if the trading price for our common stock and warrants is volatile, the trading price of our shares of common stock and warrants may be negatively impacted.

Priorcandidate products, or to this offering, there has been no public market for our common stock and warrants. The initial public offering price of our unit of one share of common stock and one half (1/2) common stock purchase warrant has been determined through negotiation with the Underwriter. This unit price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our common stock or warrants following this offering.  In addition, the trading price of our common stock and warrants following this offering is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. If an orderly trading market for our common stock and warrants does not develop and/or if the trading price for our common stock and warrants is volatile, the trading price of our shares of common stock and warrants may be negatively impacted, and you may lose all or part of your investment.

In addition, the stock market in general, and the market for newly public companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.  Broad market and industry factors may seriously affect the market price of companies’ stock, including ours, regardless of actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly following this offering.  Historically, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against such a company.  If securities class action litigation is instituted against us, it could result in substantial costs and a diversion of our management’s attention and resources and our business, financial condition, and/or results of operations could suffer, the trading price of our shares of common stock and warrants could decline, and, accordingly, you may lose all or part of your investment.

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We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock and warrants less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companiesgrant licenses on terms that are not “emerging growth companies” including, but not limitedfavorable to not being required to comply with the auditor attestation requirements of Section 404 and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find ourus.

Our common stock and warrants less attractive if we rely on these exemptions. If some investors find our common stock and warrants less attractive as a result, there mayprice is expected to be a less active trading market for our common stock and warrants, their respective prices may be more volatile.

A total of 7,910,000 of our total outstanding shares are being registered for resale. A total of 1,549,695 shares (excluding 640,000 shares of common stock issuable pursuant to vested stock options) are subject to lockup agreements with our Underwriter for a period of 13 months after the date of this prospectus and the balance of 6,360,305 shares may be sold immediately on the NASDAQ Exchange. The large number of shares eligible for public sale could depress the market price of our common stock and warrants.

The market price of our common stock could be subject to significant fluctuations. Market prices for securities of early-stage pharmaceutical, biotechnology and warrants could decline as a resultother life sciences companies have historically been particularly volatile. Some of sales of a large number of shares of our common stock in the market after this offering, and the perceptionfactors that these sales could occur may also depresscause the market price of our common stock to fluctuate include:

The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of our common stock. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and warrants. Based on shares outstanding asdiversion of April 8, 2013 , we will have 9,860,000 shares ofmanagement attention and resources, which could significantly harm our profitability and reputation.

Our common stock outstanding after this offering.  Allis currently traded in the OTC Pink Marketplace and is subject to additional trading restrictions as a “penny stock,” which could adversely affect the liquidity and price of these shares ofsuch stock. If our common stock willremains subject to the SEC’s penny stock rules, broker-dealers may experience difficulty in completing customer transactions and trading activity in our securities may be freely tradableadversely affected.

Our common stock currently trades in the United States.OTC Pink Marketplace. The holders of 1,549,695 shares of outstanding common stockOTCPink, the OTC Bulletin Board and 640,000 vested stock options have agreed with the Underwriter, subjectPink Sheets are viewed by most investors as a less desirable, and less liquid, marketplace. As a result, an investor may find it more difficult to certain exceptions, not topurchase, dispose of or hedge anyobtain accurate quotations as to the value of theirour common stock.

Because our common stock (including the common stock issuable upon exercise of the vested stock options) during the 13-month period beginningis not listed on the date of this prospectus, except with the prior written consent of our Underwriter.   After the expiration of the 13-month restricted period, theseany national securities exchange, such shares maywill also be sold in the public market in the United States, subject to prior registration in the United States, if required, or reliance upon an exemption from U.S. registration. The availability of the 7,910,000 shares of Common Stock being registered for resale, of which 6,360,305 shares may be sold immediately, can cause the price of the Common Stock to fall below the offering price and investors may suffer a significant and immediate decline in the price of the Common Stock.

In addition, upon completion of this offering, we intend to file a registration statement to register 1,800,000 shares of our outstanding common stock reserved for future issuance under our equity compensation plans.  Upon the effectiveness of that registration statement, subject to the satisfactionregulations regarding trading in “penny stocks,” which are those securities trading for less than $5.00 per share, and that are not otherwise exempted from the definition of a penny stock under other exemptions provided for in the applicable exercise periods and, in certain cases, lock-up agreements with the representativesregulations. The following is a list of the Underwriter referredgeneral restrictions on the sale of penny stocks:

Before the sale of penny stock by a broker-dealer to above,a new purchaser, the sharesbroker-dealer must determine whether the purchaser is suitable to invest in penny stocks. To make that determination, a broker-dealer must obtain, from a prospective investor, information regarding the purchaser’s financial condition and investment experience and objectives. Subsequently, the broker-dealer must deliver to the purchaser a written statement setting forth the basis of commonthe suitability finding and obtain the purchaser’s signature on such statement.

A broker-dealer must obtain from the purchaser an agreement to purchase the securities. This agreement must be obtained for every purchase until the purchaser becomes an “established customer.” The Securities Exchange Act of 1934 (the “Exchange Act”) requires that before effecting any transaction in any penny stock, issued upon exercisea broker-dealer must provide the purchaser with a “risk disclosure document” that contains, among other things, a description of outstanding options will be available for immediate resalethe penny stock market and how it functions, and the risks associated with such investment. These disclosure rules are applicable to both purchases and sales by investors.

A dealer that sells penny stock must send to the purchaser, within 10 days after the end of each calendar month, a written account statement including prescribed information relating to the security.

These requirements can severely limit the liquidity of securities in the United States in the open market.

Salessecondary market because fewer brokers or dealers are likely to be willing to undertake these compliance activities. As a result of our common stock not being listed on a national securities exchange and the rules and restrictions regarding penny stock transactions, an investor’s ability to sell to a third party and our ability to raise additional capital may be limited. We make no guarantee that market-makers will make a market in our common stock, or that any market for our common stock will continue.

Our principal stockholders have significant influence over us, they may have significant influence over actions requiring stockholder approval, and your interests as lockup restrictions end,a stockholder may depressconflict with the interests of those persons.

Based on the number of outstanding shares of our common stock held by our stockholders as of July 24, 2018, our directors, executive officers and their respective affiliates beneficially owned or controlled over 47.12% of our outstanding shares of common stock. As a result, those stockholders have the ability to exert a significant degree of influence with respect to the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. The interests of these persons may not always coincide with our interests or the interests of our other stockholders. This concentration of ownership could harm the market price of our common stock by (i) delaying, deferring or preventing a change in corporate control, (ii) impeding a merger, consolidation, takeover or other business combination involving us, or (iii) discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

Our common stock is highly illiquid and warrants makingthe public market for the common stock may be minimal; therefore you may find it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales also could cause our stock price to fall and make it more difficult for you to sell shares of our common stock and warrants, and, accordingly, you may lose all or part of your investment.acquire in this offering.

Ownership of our common sharesThere is concentrated and you and other investors will have minimal influence on stockholder decisions.

As of April 8, 2013 , our executive officers, directors, and a small number of investors, beneficially owned an aggregate of 6,969,689 shares of common stock and/or preferred stock convertible into common stock, representing approximately 66% of the voting power of our then-outstanding capital stock.  As a result, our existing officers, directors, and such investors could significantly influence stockholder actions of which you disapprove or that are contrary to your interests. This ability to exercise significant influence could prevent or significantly delay another company from acquiring or merging with us and thecurrently very little public trading price of our shares of common stock and warrants could decline, and, accordingly, you may lose all or part of your investment.

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Securities analysts may not coverfor our common stock, and thistrading may havenot significantly increase in the foreseeable future.

The lack of an active market impairs an investors’ ability to sell their shares at the time they wish to sell them or at a negative impact onprice that they consider reasonable. The lack of an active market may also reduce the fair market value of investors’ shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire additional intellectual property assets by using our shares as consideration.

Sales of substantial amounts of our common stock under Rule 144 in the public markets could cause the market price of our common stock and warrants.to decline.

The trading market for our common stock and warrants may depend on the research and reports that securities analysts publish about us or our business.  We do not have any control over these analysts.  There is no guarantee that securities analysts will cover our common stock.  If securities analysts do not cover our common stock, the lack of research coverage may adversely affect the market priceSubstantial amounts of our common stock and warrants.  If we are covered by securities analysts, and our stock is downgraded,may be sold under Rule 144 into the price of ourpublic market which may adversely affect prevailing market prices for the common stock and warrants would likely decline.  If one or more of these analysts ceasescould impair our ability to cover us or fails to publish regularly reports on us, we could lose or fail to gain visibilityraise capital in the financial markets, which could causefuture through the sale of equity securities. Rule 144 permits a decline in our stockperson who presently is not and warrant price and/or trading volume,who has not been an affiliate of ours for at least three months immediately preceding the sale and accordingly, you may lose all or partwho has beneficially owned the shares of your investment.

The application of the Securities and Exchange Commission’s “penny stock” rules to our common stock could limit trading activity in the market, and our stockholders may find it more difficultfor at least six months to sell their stock.

such shares without restriction other than the requirement that there be current public information as set forth in Rule 144. If our common stock trades at lessa non-affiliate has held the shares for more than $5.00 per share, then itone year, such person may make unlimited sales pursuant to Rule 144 without restriction. Shares held by directors, executive officers, and other affiliates will also be subject to volume limitations under Rule 144 under the Securities and Exchange Commission’s (“SEC”) penny stock rules.  Penny stocks generally are equity securities with a price of less than $5.00. Penny stock rules require a broker-dealer, priorAct. Rule 144 will be available to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market.  The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account.  The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.  These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules.  The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit their market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock which may depress the market price of our common stock and warrants and, accordingly, you may lose all or part of your investment.stockholders beginning on October 18, 2018.

We do not currently intend to pay dividends forto our stockholders in the foreseeable future, and you must relyconsequently, your ability to achieve a return on increasesyour investment will depend on appreciation in the market pricesvalue of our common stockCompany.

We have never and warrants for returns on your investment.

For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends onto our common stock. Accordingly,stockholders in the foreseeable future. Consequently, investors must be prepared to rely on sales of their common stock and warrantsor underlying common stock after price appreciation, to earn an investment return, which may never occur.  Investorsoccur, as the only way to realize any future gains on their investments. There is no guarantee that the valuation of our Company will appreciate in value or even maintain the valuation at which our stockholders have purchased their shares.

We may issue preferred stock which may have greater rights than our common stock.

Our Amended and Restated Certificate of Incorporation allow our Board of Directors to issue up to 10,000,000 shares of preferred stock. Currently, no shares of preferred stock are issued and outstanding. However, we can issue shares of our preferred stock in one or more series and can set the terms of the preferred stock without seeking cash dividends should not purchaseany further approval from the holders of our common stock. Any determinationpreferred stock that we issue may rank ahead of our common stock in terms of dividend priority or liquidation premiums and may have greater voting rights than our common stock. In addition, such preferred stock may contain provisions allowing it to be converted into shares of common stock, which could dilute the value of our common stock to then current stockholders and could adversely affect the market price, if any, of our common stock.

If there should be dissolution of our company, you may not recoup all or any portion of your investment.

In the event of a liquidation, dissolution or winding-up of our Company, whether voluntary or involuntary, the proceeds and/or assets of our company remaining after giving effect to such transaction, and the payment of all of our debts and liabilities and distributions required to be made to holders of any outstanding common stock will then be distributed to our stockholders on a pro rata basis. We may incur substantial amounts of additional debt and other obligations such as convertible notes and loans and preferred stock that will rank senior to our common stock, and the terms of our common stock do not limit the amount of such debt or other obligations that we may incur. There can be no assurance that we will have available assets to pay dividends into the future will be made at the discretionholders of common stock or common stock any amounts, upon such a liquidation, dissolution or winding-up of our BoardCompany. In this event, you could lose some or all of Directors and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our Board of Directors deems relevant.your investment.

We will have broad discretion over the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion to use the net proceeds of this offering for a variety of purposes, including, further development of our products and operations, working capital, and general corporate purposes. We may spend or invest these proceeds in a way with which our stockholders disagree. Failure by our management to effectively use these funds could harm our business and financial condition. Until the net proceeds are used, they may be placed in investments that do not yield a favorable return to our investors, do not produce significant income or lose value.   See “Use of Proceeds.”

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forwardforward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may” or other similar expressions in this prospectus. These statements that involve risks and uncertainties, principally inmay be found under the sections entitled “Descriptionsection of Business,” “Risk Factors,” and “Management’sthis prospectus captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations,.” Allas well as in prospectus generally. In particular, these include statements other than statementsrelating to future actions, prospective products, applications, customers, technologies, future performance or results of historical fact contained in this prospectus, including statements regarding future events, our futureanticipated products, expenses, and financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identifyresults. These forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology. Although we do not make forward looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictionssubject to certain risks and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in this prospectus, which maythat could cause our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this prospectus. We undertake no obligation to publicly update or revise any forward-looking statements included herein or to update the reasons why actual results could differ from those contained in any forward-looking statements.  Allsuch statements, whether as a result of new information, future events or otherwise, except to the extent required by federal securities laws. Actual future results may vary materially as a result of various factors, including, without limitation, the risks disclosed herein. In light of these risks and uncertainties, we cannot assure you that the forward-looking statements includedcontained herein will in this document are based on information available to us on the date hereof, and we assumes no obligation to update any such forward-looking statements.

fact occur. You should not place undue reliance on anythese forward-looking statement, eachstatements. Before making a decision to purchase shares of which applies only asour stock, you should carefully consider all of the date of this prospectus. Before you invest in our securities, you should be aware that the occurrence of the events described in the section entitled “Risk Factors” and elsewherefactors identified in this prospectus that could negatively affectcause actual results to differ.

This prospectus also contains estimates, projections and other information concerning our industry, our business, operating results, financial condition and stock price. Except as requiredthe markets for certain diseases, including data regarding the estimated size of those markets. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by law, we undertake no obligationmarket research firms and other third parties, industry, medical and general publications, government data, and similar sources

USE OF PROCEEDS

This prospectus relates to update or revise publicly anythe resale of the forward-looking statements after the date of this prospectus to conform our statements to actual results or changed expectations.

Selling Stockholder

We have an obligation to purchase up to 300,000certain shares of our common stock that may be offered and sold from Richard Giles outtime to time by the Selling Stockholders. This prospectus also relates to shares of our common stock that will be issued to the Selling Stockholders upon exercise of outstanding Warrants. We will not receive any proceeds from (i) the Underwriter’s overallotment option to purchase up to 225,000 units and (ii) the exercisesale of warrants underlying such units.

If the Underwriter exercises its over-allotment option to purchase up to 225,000 Units, we have an obligation to purchase up to 200,000 shares of our common stock at $4.784 per share and up to an additional 100,000 shares of common stock at $5.15 per share out of thein this offering. We will receive proceeds from the exercise of the over-allotment option and the exercise ofany Warrants, but cannot predict when or if the warrants underlying such Units, respectively, from a selling stockholder.  The shares purchased from the stockholder will be retired by us.  exercised, and it is possible that the warrants may expire and never be exercised. To the extent we do receive any such proceeds they will be used to fund our working capital and for general corporate purposes.

DETERMINATION OF OFFERING PRICE

The 300,000Selling Stockholders will determine at what price they may sell the offered shares, and such sales may be made at prevailing market prices, or at privately negotiated prices.Please refer to “Plan of Distribution.”

MARKET PRICE OF OUR COMMON STOCK AND

RELATED STOCKHOLDER MATTERS

Our authorized capital stock consists of 350,000,000 shares of common stock, $0.0001 value per share, and 10,000,000 shares of preferred stock, $0.0001 par value per share. As of July 24, 2018, we have 38,674,264 shares of common stock outstanding and no shares of preferred stock outstanding.

Our common stock is quoted on the OTCPink under the symbol “PCSA”. We have one class of common stock. As of July 24, 2018, there were acquired by the selling stockholder in April 2011 upon consummationapproximately 172 registered holders of the purchase by us of certainrecord of our assets from the selling stockholder in a transaction that was exempt under Section 4(a)(2) of the Securities Act of 1933.  common stock.

The following table sets forth information regarding the shareshigh and low sales price of our common stock owned beneficially as of April 8, 2013 , byon the selling stockholder, Mr. Richard Giles. Mr. Giles owns more than 5% ofOTCPink during the outstanding shares of Company common stock.  He wasperiods listed below (as adjusted for a director of the Company from April 2011 to June 2012 and has been a consultant of the Company from April 2011 to the present.

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(1)

Includes 40,000 vested performance options.

(2)

Shares underlying 200,000 units constitute 200,000 shares of common1-7 reverse stock and up to 100,000 shares of common stock upon exercise, if any, of 100,000 warrants included in the units.

(3)

Amount gives effect to the automatic conversion of all 2,860,000 shares of preferred stock to 6,460,000 shares of common stock and 40,000 vested performance options but does not include:

·

the issuance of 1,022,000 and 1,400,000 shares of common stock upon exercise of stock options and performance stock options, respectively;

·

the issuance of 762,500 shares of common stock underlying 762,500 outstanding warrants, including the issuance of 12,500 warrants upon exercise of our Underwriter’s overallotment option; and

·

the issuance of 150,000 shares of common stock underlying warrants issued to our Underwriter in connection with this offering.

Use of Proceeds

We estimate that our net proceeds from this offering will be approximately $6,753,750, after deducting underwriting discounts and commissions of $624,000, our estimated Underwriter’s expenses of $234,000 and our estimated offering expenses of $188,000. We will receive additional net proceeds of up to $1,071,225, after deducting $93,150 in underwriting discounts and commissions, if our Underwriter exercises its overallotment option to purchase up to 225,000 additional units from us, for total combined net proceeds of $7,824,975.

If the Underwriter exercises its over-allotment option to purchase up to 225,000 Units, we have an obligation to purchase up to 200,000 shares of common stock at $4.784 per share and up to an additional 100,000 shares of common stock at $5.15 per share out of the proceeds from the exercise of the over-allotment option and the exercise of the warrants underlying such Units, respectively, from a selling stockholder.  The shares purchased from the stockholder will be retired by us.

We intend to use the net proceeds of this offering for reseller network development, executive management salaries and benefits, debt repayment, intellectual property development and protection, research and development, and general working capital purposes as detailed below.  Our planned debt repayment relates to the required principal payments of our $1,000,000 senior subordinated note payable to one of our founders, Richard Giles, which bears interest at 6% per annum and has mandatory principal payments of $250,000 due on October 15, 2013 and $250,000 duesplit on December 15, 2013.   The remaining mandatory principal payments totaling $500,000 are due in calendar year 2014.  Our planned expenditures for activities during calendar 2013 that are to be funded from the proceeds of this offering are as follows:11, 2017):

DIVIDEND POLICY

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The following table summarizes the maximum proceeds from the exercise of our warrants.  The warrants expire one year from the date of issuance.

We have an obligation to use the net proceeds from the exercise of warrants, if any, first to purchase 100,000 shares from the selling stockholder and the balance, if any, for general working capital purposes.

Pending our application of proceeds as we have described, we will invest proceeds in short-term, investment grade interest bearing securities.

Dividend Policy

We have nevernot previously declared or paid cashany dividends on our common stock. We currently intend to retainThe payment of dividends on our common stock in the future earnings to financewill depend on our profitability at the operation, developmenttime, cash available for those dividends, and expansionsuch other factors as our board of our business.directors may consider appropriate. We do not anticipate paying cash dividends on our common stock in the foreseeable future. Payment of future cash dividends, if any, will be at the discretion of

DILUTION

At March 31, 2018, our Board of Directors and will depend on our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors that our Board of Directors considers relevant.

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Capitalization

The following table sets forth our unaudited capitalization as of December 31, 2012. Our capitalization is presented:

·

on an actual basis; and

·

on an as adjusted basis to reflect the sale of 1,500,000 units offered by the Company at $5.20 per unit, after deducting estimated underwriting expenses and commissions and offering expenses payable by us, and the conversion of all of our preferred stock into 6,460,000 shares of common stock.

You should read this table together with “Management’s Discussion and Analysis or Plan of Operation,” the financial statements and notes thereto and other information appearing elsewhere in this prospectus.

The information provided above excludes:

·

1,022,000 and 1,440,000 shares of common stock issuable upon exercise of outstanding stock options and performance stock options, respectively;

·

up to 25,000 shares of common stock issuable upon exercise of our Underwriter’s overallotment option;

·

up to 762,500 shares of common stock issuable upon exercise of warrants issued by the Company, including the 12,500 warrants issuable upon exercise of our Underwriter’s overallotment option; and

·

150,000 shares of common stock issuable upon exercise of our Underwriter’s warrants.

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Determination of Offering Price

The price of the units we are offering was arbitrarily determined in order for us to raise up to a total of $7,800,000 in this offering, assuming no exercise of the Underwriter’s overallotment option. The offering price bears no relationship whatsoever to our assets, earnings, book value or other criteria of value. Among the factors considered were:

·

our lack of operating history,

·

the proceeds to be raised by the offering,

·

the amount of capital to be contributed by purchasers in this offering in proportion to the amount of stock to be retained by our existing stockholder, and

·

our relative cash requirements.

Dilution

Our pro forma net tangible book value (unaudited) as of December 31, 2012 was $151,590,($981,515), or $0.02($0.03) per share of the outstanding common stock and common stock equivalents. Our pro forma netas adjusted. Net tangible book value per share representsis determined by dividing our totalnet tangible assets at December 31, 2012, less total liabilities, dividedbook value by the pro forma total number of shares of common stock outstanding at such date.  The pro forma total numberoutstanding. We will not receive any proceeds from the sales by Selling Stockholders. While we will receive proceeds from the exercise of shares of common stock outstanding assumesWarrants, there can be no assurance that all 2,860,000 shares ofany Warrants will be exercised. Assuming that no Warrants are exercised, our preferred stock convert into 6,460,000 shares of common stock.  The dilution in pro forma net tangible book value will not change after sales by the Selling Stockholders. Assuming sales by the Selling Stockholders occur at the price of $2.65 per share represents the difference between the $5.20 price paid by purchasers of units in this offering ($5.15 of which is attributable to the common stock and $0.05 of which is attributable to the warrants) and the net tangible book value per shareclosing price of our common stock immediately following this offering.

After giving effect to the sale of 1,500,000 units offered by us at $5.20 per unit and after deducting estimated underwriting discounts and commissions, and offering expenses payable by us,on July 25, 2018, our pro forma net tangible book value, as adjusted, as of December 31, 2012 would have been approximately $6,905,340 or $0.70 per share of common stock. This amount represents an immediate increase in pro forma net tangible book value of $0.68 per share to the existing stockholders($0.03) as of March 31, 2018 remains, and new investors will experience an immediate dilution in pro forma net tangible book value of $4.45 per share of common stock$2.68 relative to new investors purchasing units in this offering.their purchase price.

The following table illustrates the dilution in pro forma net tangible book value per share to new investors.

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The following table summarizes on a pro forma basis, as of December 31, 2012, the number of shares of common stock purchased from us, the total consideration paid to us, and the average price per share paid by existing stockholders and new investors purchasing units in this offering, before estimated offering expenses:

The information for existing stockholders in the table above:

·

foregoing assumes the conversion of all 2,860,000 shares of preferred stock into 6,460,000 shares of common stock;

·

excludes shares of common stock issuable upon exercise of outstanding stock options andthat outstanding warrants have not been exercised. At March 31, 2018, no warrants purchased in this offering, warrants issuable upon exercise of our Underwriter’s overallotment option and warrants issued to our Underwriter in this offering;were issued.

·

excludes the sale of 300,000 shares of common stock by a selling stockholder; andMANAGEMENT’S DISCUSSION AND ANALYSIS OF

·FINANCIAL CONDITION AND RESULTS OF OPERATIONS

attributes $5.15 of the $5.20 unit price to the common stock and $0.05 to the warrants.

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Management’s Discussion and Analysis or Plan of Operation

You should read the following discussion of the financial condition and plan of operation in conjunction with our Heatwurx and predecessor carve-out financial statements and the notes to financial statements included elsewhere in this prospectus.  Heatwurx, Inc. was incorporated on March 29, 2011 and we commenced operations on that date.  On April 15, 2011, we entered into an asset purchase agreement with Mr. Richard Giles, a current stockholder of Heatwurx, Inc. Pursuant to the agreement, we purchased the related business and activities of the design, manufacture and distribution of asphalt repair machinery under the Heatwurx brand.  

Mr. Giles began developing the Heatwurx business during 2009.  The financial statements of Heatwurx included in this prospectus for the period from January 1, 2011 through April 15, 2011 (date of acquisition of the Heatwurx business from Mr. Giles’ construction business have been disaggregated, or “carved-out” of the financial statements of Mr. Giles construction business, as our “predecessor”.  These carved-out financial statements form what we refer to herein as the financial statement of our predecessor, and include both direct and indirect expenses.  The historical direct expenses consist primarily of the various cost of development of the Heatwurx equipment (technology, design, etc.), incurred by Mr. Giles construction business on behalf of Heatwurx.  Indirect expenses represent principally the estimated time Mr. Giles spent on Heatwurx activities.  In addition, the net intercompany activities between predecessor and Mr. Giles Construction business have been accumulated in a single caption entitled, “Divisional Net Equity”.

The Heatwurx financial information as of December 31, 2011 and December 31, 2012, and for the periods from March 29, 2011 (date of inception) through December 31, 2011 and for the year ended December 31, 2012 are referred to in this prospectus as the financial information of the successor.

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of various factors, including those discussed in “Risk Factors” and elsewhere in this prospectus.

Overview and Basis of Presentation

Heatwurx, Inc. was incorporated under the laws of the State of Delaware on March 29, 2011 as Heatwurxaq, Inc. and subsequently changed its name to Heatwurx, Inc. on April 15, 2011. We have not yet commercialized our products and we are therefore classified as a development stage enterprise.

We are an asphalt preservation and repair equipment company.  Our innovative, and eco-friendly hot-in-place recycling process corrects surface distresses within the top 3 inches of existing pavement by heating the surface material to a temperature between 300° and 350° Fahrenheit with our electrically powered infrared heating equipment, mechanically loosening the heated material with our processor/tiller attachment that is optimized for producing a seamless repair, and mixing in additional recycled asphalt pavement and a binder (asphalt-cement), and then compacting repaired area with a vibrating roller or compactor.  We consider our equipment to be eco-friendly as the Heatwurx process reuses and rejuvenates distressed asphalt, uses recycled asphalt pavement for filler material, eliminates travel to and from asphalt batch plants, and extends the life of the roadway.  We believe our equipment, technology and processes provide savings over other processes that can be more labor and equipment intensive.

Our hot-in-place recycling process and equipment has been selected by the Technology Implementation Group of the American Association of State Highway Transportation Officials (AASHTO TIG) as an “additionally Selected Technology” for the year 2012. We develop, manufacture and intend to sell our unique and innovative and eco-friendly equipment to federal, state and local agencies as well as contractors for the repair and rehabilitation of damaged and deteriorated asphalt surfaces.

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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.  However, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.  Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Critical Accounting Policies and Estimates

Use of Estimates

Management’s discussion and analysis of our financial condition and results of operations include the predecessors’should be read in conjunction with our consolidated financial statements for the periods through April 15, 2011; and the successor’srelated notes included elsewhere in this prospectus. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” and elsewhere in this Prospectus.

Background

On October 2, 2017 Heatwurx and Processa Therapeutics, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Heatwurx entered into the Acquisition Agreement with Promet pursuant to which, on October 4, 2017, Heatwurx acquired all of the assets of Promet in exchange for issuing to Promet approximately 31,745,242 shares of the common stock of Heatwurx in a reverse acquisition transaction. Following the closing, Heatwurx changed its name to Processa Pharmaceuticals, Inc.

Following the acquisition, we abandoned our prior business plan and are now pursuing Promet’s historical business and proposed business, with a focus on developing drugs to treat patients that have a high unmet medical need. Prior to the acquisition, Heatwurx had nominal net liabilities and operations and it was considered a non-operating public shell corporation. Therefore, because Promet is considered the accounting acquirer and Heatwurx is considered the accounting acquiree (and legal acquirer), we have presented Promet’s information as that of the Company’s, including its operations prior to the closing of the Acquisition Agreement.

We are an emerging pharmaceutical company focused on the clinical development of drug products that are intended to improve the survival and/or quality of life for patients who have a high unmet medical need. Within this group of pharmaceutical products, we currently are developing one product for two indications and searching for additional products for our portfolio. Our lead product, PCS-499, is an oral tablet that is an analog of an active metabolite of an already approved FDA drug. The advantage of PCS-499 is that it may potentially work in many conditions because it has multiple pharmacological targets that it affects that are important in the treatment of these conditions. Based on its pharmacological activity, we have identified other unmet medical need conditions where the use of PCS-499 may result in clinical efficacy. These include NL and RIF in head and neck cancer patients. We have met with the FDA on the NL condition and have developed a strategy for moving the program for NL forward starting with a Phase 2 clinical trial in NL patients in late 2018.

On June 22, 2018, the FDA granted orphan-drug designation to our leading clinical compound PCS-499 for treatment of NL.

Going Concern and Management’s Plan

Our consolidated financial statements are prepared using U.S. GAAP and are based on the assumption that the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We face certain risks and uncertainties that are present in many emerging growth companies regarding product development and commercialization, limited working capital, recurring losses and negative cash flow from operations, future profitability, ability to obtain future capital, protection of patents, technologies and property rights, competition, rapid technological change, navigating the domestic and major foreign markets’ regulatory and clinical environment, recruiting and retaining key personnel, dependence on third party manufacturing organizations, third party collaboration and licensing agreements, lack of sales and marketing activities and no customers or pharmaceutical products to sell or distribute. These risks and other factors raised substantial doubt about our ability to continue as a going concern as of December 31, 2012 and 2011,the date of the filing of our annual report on Form 10-K for the year ended December 31, 20122017 and our quarterly report on Form 10-Q for the three months ended March 31, 2018.

We have relied exclusively on private placements with a small group of accredited investors to finance our business and operations. We do not have any credit facilities as a source of future funds. We have not had any revenue since our inception on August 31, 2015 and we do not currently have any revenue under contract or any immediate sales prospects. As of March 31, 2018, we had an accumulated deficit of approximately $5.0 million incurred since inception. For the three months ended March 31, 2018, we incurred a net loss from continuing operations of approximately $1.1 million and used approximately $1.1 million in net cash from operating activities. We expect our operating costs to be substantial as we incur costs related to the clinical trials for our product candidates and that we will operate at a loss for the foreseeable future.

As further described under Recent Developments, since December 31, 2017 we have received proceeds of approximately $3.1 million dollars from the sale of 1,402,441 shares of our common stock and warrants to purchase the same number of shares of common stock exercisable at $2.724 per share. We also entered into an agreement with an investor for a commitment to fund up to $1.8 million of clinical trial expenses in exchange for 792,952 shares of our common stock and warrants to purchase the same number of shares of common stock exercisable at $2.724 per share. We will use these committed funds for our Phase 2a clinical trial of PCS-499 in patients with NL. Payment under this commitment will be made directly to the CRO based on their invoicing and not to us. Finally, on May 25, 2018, we converted approximately $2.35 million of our 8.0% Convertible Notes into 1,206,245 shares of our common stock.

We are looking at ways to add an additional revenue stream to offset some of our expenses. We are planning on raising additional funds in the first half of 2019.  In addition, we are seeking alternative options to add additional cash.

Recent Developments

Orphan Drug Designation. On June 22, 2018, the FDA granted orphan-drug designation to our leading clinical compound PCS-499 for treatment of NL.

CoNCERT Agreement. On March 19, 2018, Promet, we and CoNCERT Pharmaceuticals Inc. (“CoNCERT”) amended the Option and License Agreement (the “Agreement”) executed in October 2017. The Agreement was assigned to us and we exercised the exclusive option for the PCS-499 compound. The option was exercised in exchange for CoNCERT receiving (i) $8.0 million of our common stock that was owned by Promet (2,090,301 shares), and (ii) 15% of any sublicense revenue we earn for a period equivalent to the royalty term (as defined in the Agreement) until the earliest of: (a) our raising $8.0 million of gross proceeds; and (b) CoNCERT being able to sell the shares of our common stock without restrictions pursuant to the terms of the amended Agreement. All other terms of the Agreement remain unchanged. As a result, we recognized an intangible asset of approximately $11.0 million, additional paid-in capital of $8.0 million resulting from Promet satisfying our liability to CoNCERT, along with a $3.0 million deferred tax liability related to the acquired temporary difference for an asset purchased that is not a business combination and has a nominal tax basis.

PIPE Transaction. On May 15, 2018, and June 29, 2018, we entered into Subscription and Purchase Agreements (the “Purchase Agreements”) with certain accredited investors (who are now part of the Selling Stockholders) and conducted closings pursuant to which we sold 1,402,441 shares of common stock at a purchase price of $2.27 per share. In addition, each investor received a warrant to purchase one share of common stock for each share of common stock purchased by such investor at an exercise price equal to $2.724, subject to adjustment thereunder.

We received total gross proceeds of approximately $3.1 million prior to deducting placement agent fees and estimated expenses payable by us. We currently intend to use the proceeds of the Private Placement to fund research and development of our lead product candidate, PCS-499, including clinical trial activities, and for general corporate purposes.

Boustead Securities, Ltd. (“Boustead”) acted as placement agent and received $167,526 and a Placement Agent Warrant to purchase up to 84,146 shares of common stock at an exercise price equal to $2.724.

Clinical Trial Funding. On May 25, 2018, we entered into an agreement with an accredited investor to whom we sold 792,952 shares of common stock at a purchase price of $2.27 per share for $1.8 million of gross proceeds. We will use these committed funds for our Phase 2a clinical trial of PCS-499 in patients with NL which is planned to begin in the fourth quarter of 2018. The investor will make payments not to us, but rather directly to the CRO conducting our Phase 2 Necrobiosis Lipoidica Trial based on their invoicing. The investor also received warrants to purchase one share of common stock for each share of common stock purchased at an exercise price equal to $2.724.

Boustead acted as placement agent and received $108,000 and a warrant to purchase up to 47,578 shares of common stock at an exercise price equal to $2.724.

Note Conversion. On May 25, 2018, we converted approximately $2.35 million of our mandatory convertible 8.0% Senior Notes and accrued interest of $100,000 into 1,206,245 shares of common stock, at a price of $2.043 per share. The noteholders also received warrants to purchase one share of common stock for each share of common stock purchased at an exercise price equal to $2.452.

Boustead acted as placement agent and received $144,955 and a warrant to purchase up to 79,423 shares of common stock at an exercise price equal to $2.724.

The shares of common stock for both PIPE Transactions and the clinical trial funding were sold in a private placement pursuant to exemptions from the registration requirements of the Securities Act afforded by Rule 506 of Regulation D promulgated thereunder.

The common stock, but not the warrants, issued for the PIPE Transactions, the clinical trial funding and the note conversion have, subject to certain customary exceptions, full ratchet anti-dilution protection. Until we have issued equity securities or securities convertible into equity securities for a total of an additional $20.0 million in cash or assets, including the proceeds from the exercise of the warrants issued above, in the event we issue additional equity securities or securities convertible into equity securities at a purchase price less than $2.27 per share of common stock, the above purchase price shall be adjusted and new shares of common stock issued as if the purchase price was such lower amount (or, if such additional securities are issued without consideration, to a price equal to $0.01 per share).

Results of Operations

Comparison of three months ended March 31, 2018 and 2017

Our consolidated results of operations for the three months ended March 31, 2018 and 2017 were as follows:

Revenues. To date we have not generated any revenue and do not expect to generate any revenue from any drug candidates that we are developing unless and until we obtain regulatory approval and initiate commercialization of these drugs or enter into collaborative agreements.

Operating Expenses.

Research and Development Expenses. Our research and development expenses consist primarily of (i) licensing of compounds for product testing and development, (ii) program and testing related expenses, (iii) amortization of the exclusive license intangible asset used in research and development activities, and (iv) internal research and development staff related payroll, taxes and employee benefits, external consulting and professional fees related to the product testing and development activities of the Company.

Research and development expenses for the three months ended March 31, 2018 increased by $667,729, or 477% to $807,661 compared to $139,922 for the three months ended March 31, 2017.

The majority of the increase in research and development expenses relate to research and development expenses for licensing, program and testing costs related to PCS-499 of approximately $604,000. This included costs related to the need to establish a new site to manufacture the tablets of PCS-499 since the original CoNCERT tablet manufacturing site could no longer be used. Once a vendor was chosen, the CoNCERT Option and License agreement allowed us to begin the transfer and development of manufacturing and analytical processes. The manufacturing development and initial testing was required to ensure that the consistency of the product was maintained and similar to the PCS-499 tablets manufactured by CoNCERT. As a result of exercising the option, we recognized approximately $25,000 of amortization expense on the intangible asset in 2018 with no similar cost in 2017.

Research and development staff related payroll, taxes and employee benefits also increased $45,000 in 2018 compared to 2017 as a result of an increase in full-time equivalent staff and related costs. Professional fees increased slightly in support of the increased licensing, program and testing activities.

During the first quarter of 2017, the majority of costs we incurred were related to a licensing agreement we had with Drexel University which was terminated in 2017. We did not incur any costs in 2018 related to the Drexel Agreement.

We expect research and development expenses to increase as we advance our lead candidates and pipeline product candidates.

General and Administrative Expenses. General and administrative expenses for the three months ended March 31, 2018 increased $389,937 or 414.7% to $483,955 compared to $94,018 for the three months ended March 31, 2017. The increase in general and administrative expenses relate primarily to professional fees for legal, accounting, advisory and consulting costs of approximately $191,000 related to our operations and costs of being a public company; a cybersecurity fraud loss of approximately $144,000 for which we do not have insurance coverage; and an increased internal general and administrative staff related payroll, taxes and employee benefits of approximately $40,000 due to an increase in full-time equivalent staff and related costs to support the growth in our operations and public company reporting requirements. Changes in other general and administrative expenses were not material and accounted for the balance of the increase in general and administrative expenses for the comparable periods.

A stockholder, CorLyst, LLC (“CorLyst”) reimburses us for shared costs related to payroll, health care insurance and rent based on actual costs incurred. We recognize the reimbursement as a reduction of our general and administrative operating expenses. Reimbursements amounts totaled $26,684 and $29,430 for the three months ended March 31, 2018 and 2017, respectively. We had a receivable from CorLyst at March 31, 2018 and December 31, 2017 of $26,684 and $62,709, respectively.

During 2017, CorLyst paid certain operating expenses on our behalf and we reimbursed CorLyst based on actual costs incurred. Accounts payable amounts due to CorLyst at March 31, 2018 and December 31, 2017 were $336 and $336, respectively. In addition, there was $100 due to an officer included in due to related parties as of March 31, 2018 and December 31, 2017.

We expect the general and administrative expenses to continue to increase as we add staff to support our research and development activities and administration requirements.

Other Income (Expense).

Interest Expense. Interest expense for the three months ended March 31, 2018 consisted of interest expense of $52,000 and the amortization of debt issuance costs of $36,000 related to the $2.58 million 8.0% Senior Convertible Notes we issued in October and November of 2017. On May 25, 2018, $2.35 million of these Notes, along with the related accrued interest were converted into 1,206,245 shares of common stock and warrants to purchase an equivalents number of shares of our common stock at $2.452 per share.

Income Tax Benefit. An income tax benefit of $281,534 and $0 was recognized for the three months ended March 31, 2018 and 2017, respectively. A deferred tax liability was recorded when CoNCERT sold its license and “Know-How” to us for stock in an Internal Revenue Code Section 351 transaction on March 19, 2018. A Section 351 transaction treats the acquisition of the Know-How for stock as a tax-free exchange. As a result, under ASC 740-10-25-51Income Taxes, we recorded a deferred tax liability of approximately $3,037,000 for the acquired temporary difference between the financial reporting basis of approximately $11,039,000 and the tax basis of approximately $2,000. The deferred tax liability may be offset by the deferred tax assets resulting from 2017 and 2018 taxable net operating losses. Under ACS 740-270Income Taxes – Interim Reporting, we are required to project our 2018 federal and state effective income tax rate and apply it to the March 31, 2018 operating loss before income taxes. Based on the projection, we expect to recognize the tax benefit from the 2017 taxable net operating loss carryover and the projected 2018 loss, which resulted in the recognition of a deferred tax benefit shown in the consolidated statements of operations for 2018.

Prior to the asset purchase transaction on October 4, 2017, Promet was treated as a partnership for federal income tax purposes and thus was not subject to income taxes at the entity level. Therefore, no provision/benefit or liability for income taxes was included in the consolidated financial statements through October 4, 2017.

Comparison of years ended December 31, 2017 and 2016

Our consolidated results of operations for the years ended December 31, 2017 and 2016 were as follows:

Revenues. To date we have not generated any revenue and do not expect to generate any revenue from any drug candidates that we develop unless and until we obtain regulatory approval and commercialize these drugs or enter into collaborative agreements.

Operating Expenses.

Research and Development Expenses. Research and development expenses consist primarily of (i) licensing of compounds for product testing and development, (ii) program and testing related expenses, and (iii) internal research and development staff related payroll, taxes and employee benefits, external consulting and professional fees related to our product testing and development activities.

Research and development expenses decreased by approximately $611,000, or 39.7% to $926,000 in 2017 compared to $1,537,000 in 2016. The decrease in research and development expenses relate primarily to the substantial completion of the licensing, program and testing costs incurred under the Drexel agreement in 2016. The contract was officially terminated in June 2017 with insignificant costs incurred during 2017. However, the CoNCERT Pharmaceuticals, Inc. license and option agreement for the replacement compound PCS-499 was not executed until October 2017. As a result, research and development expenses were approximately $747,000 less in 2017 compared to 2016. This decline was partially offset by increased research and development staff related payroll, taxes and employee benefits of approximately $136,000 in 2017 compared to 2016.

We expect research and development expenses to increase as we advance our lead candidates and pipeline product candidates. 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 can 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. Certain of our programs may be terminated due to the lack of scientific progress and lack of prospects for ultimate commercialization.

General and Administrative Expenses. General and administrative expenses for the year ended December 31, 2017 increased by approximately $492,000, or 127.9% to $876,000 in 2017 compared to $384,000 in 2016. The increase in general and administrative expenses relate primarily to professional fees for legal, accounting, advisory and consulting costs of approximately $234,000 related to our operations and costs of being a public company; increased internal general and administrative staff related payroll, taxes and employee benefits of approximately $214,000 due to growth in our operations and a full year of expense for 2016 hires; increase in office rent of approximately $55,000 as a result of being the primary obligor on the headquarters lease for a full year in 2017 compared to one-quarter in 2016 and sharing office rent costs with CorLyst, a related party of Promet and a shareholder of ours, during the balance of 2016; and, one-time costs incurred in 2017 related to the reverse acquisition of Heatwurx by Promet, which closed on October 4, 2017, of approximately $59,000 and the impairment of software costs of approximately $15,000 related to obsolete software costs as a result of the reverse acquisition transaction.

CorLyst reimburses us for shared costs related to payroll, health care insurance and rent based on actual costs incurred. We recognize the reimbursement as a reduction of our general and administrative operating expenses. Reimbursements amounts totaled $111,799 and $32,327 for the years ended December 31, 2017 and 2016, respectively. We had a receivable from CorLyst at December 31, 2017 and 2016 of $62,709 and 0, respectively.

During 2016 and 2017, CorLyst paid certain operating expenses on behalf of us and we reimbursed CorLyst based on actual costs incurred at later dates. The accounts payable amounts due to CorLyst at December 31, 2017 and 2016 were $336 and $95, respectively. In addition, there was $100 due to an officer included in due to related parties as of December 31, 2017.

We expect the general and administrative expenses to increase as we add staff to support the growing research and development activities of the Company and administration requirements.

Other Income (Expense).

Interest Expense. Interest expense was approximately $59,000 and $0 for the years ended December 31, 2017 and 2016, respectively. Interest expense represents accrued interest of approximately $35,700 and the amortization of debt issuance costs of approximately $23,300 on the $2.58 million issuance of 8.0% Senior Convertible Notes issued on October 4, 2017 ($1,250,000) and November 21, 2017 ($1,330,000). The interest accrues monthly at 8.0% annually on the principal balance outstanding and is payable in kind through the issuance of common stock of the Company at maturity, which is not later than one-year from the date of issuance of the Senior Convertible Notes. On May 25, 2018, $2.35 million of these Notes, along with the related accrued interest were converted into 1,206,245 shares of common stock and warrants to purchase an equivalents number of shares of our common stock at $2.452 per share. There was no debt outstanding in 2016.

Interest Income. Interest income was approximately $5,000 and $4,000 for the years ended December 31, 2017 and 2016, respectively. Interest income represents interest earned on money market funds and certificates of deposit which matured in 2017 and certificates of deposit in 2016.

Financial Condition

Total assets increased by approximately $9.9 million to $12.9 million at March 31, 2018 compared to $3.0 million at December 31, 2017. This increase is primarily attributable to the acquisition of the exclusive license intangible asset from CoNCERT Pharmaceuticals, Inc. for the PCS-499 compound in exchange for CoNCERT receiving $8.0 million of our common stock that was owned by Promet and the recognition of approximately a $3.0 million deferred tax liability related to the acquired temporary difference for the intangible asset between book and tax basis and transaction costs. Management believes the intangible asset is used in research and development activities and has alternative future uses (in research and development projects or otherwise). As a result, the acquisition cost of approximately $11.0 million was capitalized and is amortized over the intangible asset’s useful life in accordance with Topic 350, Intangibles – Goodwill and Other. The increase is partially offset by (i) the decrease in cash and cash equivalents of approximately $1.1 million used primarily to fund the loss from operations of approximately $1.4 million and (ii) the decrease in amounts due from CorLyst, a related party, of approximately $36,000.

We expect to continue to require significant future financing to fund our operating activities and to use cash in operating activities for the foreseeable future as we continue our research and development activities to develop products that can be commercialized to generate revenue.

Liabilities increased approximately $3.0 million to $5.6 million at March 31, 2018 compared to $2.6 million at December 31, 2017 related primarily to (i) the recognition of approximately $3.04 million for the deferred tax liability related to the acquired temporary difference for the intangible asset, partially offset by the recognition of approximately $282,000 of income tax benefit related to the release of the benefit from net operating losses and the amortization of the intangible asset; (ii) the increase in accrued interest of approximately $52,000 on the Senior Convertible Notes that is 36)not due until maturity in October and November 2018, but will be paid through issuance of a variable number of common shares based on a valuation of the stock at that date; (iii) the decrease in unamortized debt issuance costs of approximately $36,000 on the Senior Convertible Notes; and (iii) an increase in accounts payable of approximately $54,000 and accrued expenses of approximately $106,000 related primarily to purchase obligations due to contract research organizations and professional fees related to being a public company.

The changes in stockholders’ equity consist of the $1.1 million net loss for the three months ended March 31, 2018 in accumulated deficit and the fair value of the Promet common stock of $8.0 million or 2,090,301 shares exchanged with CoNCERT to acquire the exclusive license intangible asset recognized as an increase in additional paid-in capital.

Liquidity and Capital Resources

Since inception we have not generated any revenue, have incurred net losses, have used net cash in our operations and have funded our business and operations primarily through proceeds from the private placement of equity securities and senior secured convertible notes. At March 31, 2018, we had approximately $1.8 million in cash and cash equivalents compared to approximately $2.9 million in cash and cash equivalents as of December 31, 2017. As a result, substantial doubt existed about the Company’s ability to continue as a going concern as of the date of the filing of our annual report on Form 10-K for the year ended December 31, 2017 and our quarterly report on Form 10-Q for the three months ended March 31, 2018.

As described under Recent Developments, in May and June of 2018 we received proceeds of approximately $3.0 million dollars from the sale of 1,402,441 shares of our common stock and warrants to purchase a similar number of shares of common stock exercisable at $2.724 per share. On May 25, 2018, we also entered into an agreement with an investor for a commitment to fund up to $1.8 million to fund clinical trial expenses in exchange for 792,952 shares of our common stock and warrants to purchase a similar number of shares of common stock exercisable at $2.724 per share. We will use these clinical trial committed funds for our Phase 2a clinical trial of PCS-499 in patients with NL. Payment under this commitment will not be made to us, but rather, directly to the CRO based on their invoicing. Finally, on May 25, 2018 we converted approximately $2.35 million of our 8% convertible debt into 1,206,245 shares of our common stock.

Our existing cash and cash equivalents may not be sufficient to meet our anticipated cash needs and we may need additional funds to meet our operational needs and capital requirements for product development sooner than we planned. We currently have no credit facility. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, and the extent to which we may enter into additional agreements with third parties to participate in their development and commercialization, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials. Our future capital requirements will depend on many factors, including:

If additional funding is required, it 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 clinical trials, or research and development programs. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. 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 do 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, making capital expenditures or declaring dividends.

Cash Flows

Three months ended March 31, 2018 and 2017

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented.

Net cash used in operating activities

Net cash used in operating activities was $1.1 million during the three months ended March 31, 2018 primarily attributable to our net loss of $1.1 million. This amount was offset by various non-cash charges of $61,000 comprised of depreciation and amortization, and increased by a non-cash deferred tax benefit of $281,000. The net change in our operating assets and liabilities of $245,000 is primarily attributable to a $244,000 change in our accrued liabilities accounts payable.

Net cash used in operating activities was $59,000 for the three months ended March 31, 2017, which was primarily attributable to our net loss of $232,000 after adjusting for vendor deposits of $228,000 made in 2016 (that were applied to obligations due for research and development activities in 2017), and a change in our accrued expenses of $83,000.

We anticipate our research and development efforts and on-going general and administrative costs will generate negative cash flows from operating activities for the foreseeable future.

Net cash used in investing activities

Net cash used in investing activities was insignificant for the three months ended March 31, 2018 and 2017. The costs incurred related to the transaction costs incurred to acquire the exclusive license from CoNCERT, and for the period frompurchase of property and equipment in 2017.

Net cash provided by (used in) financing activities

There were no financing activities for the three months ended March 29, 2011 (date of inception) through31, 2018 and 2017. See recent developments for financing transactions that occurred subsequent to March 31, 2018.

Years ended December 31, 2011.2017 and 2016

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below.

Net cash used in operating activities

Net cash used in operating activities was $1.7 million during the year ended December 31, 2017 primarily attributable to our net loss for the year of $1.9 million. This amount was offset by non-cash charges for depreciation, amortization of debt issue costs and an impairment charge for our software totaling $40,000. The net change in our operating assets and liabilities of $160,000 was primarily attributable to vendor deposits made in 2016 that were applied to obligations due for research and development activities in 2017, offset by changes in our prepaid expenses, accounts payable and accrued expenses totaling $67,000.

Net cash used in operating activities was $2.2 million during the year ended December 31, 2016 primarily attributable to our net loss for the year of $1.9 million. This amount was offset by a nominal amount of non-cash charge for depreciation. The net change in our operating assets and liabilities of $239,000 was primarily attributable to the payment of vendor deposits of $228,000, offset by changes in our prepaid expenses, accounts payable and accrued expenses totaling $12,000.

We anticipate our research and development efforts and on-going general and administrative costs will generate negative cash flows from operating activities for the foreseeable future.

Net cash provided by (used in) in investing activities

Net cash provided by investing activities was $1.0 million for the year ended December 31, 2017. This was due to proceeds from the maturity of the certificates of deposit purchased in 2016, partially offset by software acquisition costs. Net cash used in investing activities was $1.04 million for the year ended December 31, 2016. This was due primarily to the purchase of certificates of deposit and the purchase of property and equipment and software acquisition costs.

Net cash provided by financing activities

Net cash provided by financing activities was $2.43 million for the year ended December 31, 2017 from the proceeds of the issuance of $2.58 million of 8.0% Senior Convertible Notes, partially offset by approximately $155,000 of debt issuance costs. Net cash provided by financing activities was $4.27 million for the year ended December 31, 2016 from the proceeds of the initial issuance of the private placement of equity for Promet.

Off Balance Sheet Arrangements

At March 31, 2018 December 31, 2017 and December 30, 2016, we did not have any off-balance sheet arrangements.

Contractual Obligations and Commitments

The following summarizes our contractual obligations and commitments as of December 31, 2017:

The equipment lease commenced in June 2017 and expires in August 2020. Monthly rent of $586 over the 39-month lease term includes a monthly operating usage cost allowance of $125. Additional charges for excess usage, as defined in the agreement, are charged quarterly. The lessor charges monthly sales tax of 6 percent.

Critical Accounting Policies and Use of Estimates

The discussion and analysis of our financial condition and results of operations are based on our audited consolidated financial statements which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires managementus to make estimates allocations and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. OnWe evaluate our estimates on an ongoing basis, management evaluates its estimates, including those related to impairment of long-lived assets, accrued liabilities and certain expenses.basis. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources on historical experience and on other assumptions believed to be reasonable under the circumstances.sources. Actual results may differ materially from these estimates under different assumptions or conditions.

We believe the following critical accounting policies involve significant judgments and estimates usedare most critical to aid in the preparation ofunderstanding and evaluating our financial results reported in our consolidated financial statements.

Income Taxes. As a result of our reverse acquisition, there was an ownership change as defined by Internal Revenue Recognition

Equipment sales revenue is recognized when equipment is shippedCode Section 382. Prior to our customer and collection is reasonably assured. The Company sells its equipment (HWX-30 heater and HWX-AP-40 asphalt processor), as well as certain consumables, such as rejuvenation oil, to third parties.  Equipment sales revenue is recognized when allthe closing of the following criteria are satisfied:  (a) persuasive evidence oftransaction, Promet was treated as a sales arrangement exists; (b) price is fixedpartnership for federal income tax purposes and determinable; (c) collectability is reasonably assured; and (d) delivery has occurred.  Persuasive evidence of an arrangement and a fixed or determinable price exist once we receive an order or contract from a customer.  We assess collectabilitythus was not subject to income taxes at the timeentity level and no provision or liability for income taxes has been included in the consolidated financial statements through October 4, 2017. In addition, Promet determined that it was not required to record a liability related to uncertain tax positions as a result of the salerequirements of ASC 740-10-25 Income Taxes. The net deferred tax assets of Heatwurx were principally federal and if collectability is not reasonably assured, the sale is deferred and not recognized until collectability is probable or payment is received.  Typically, title and risk of ownership transfer when the equipment is shipped.

Research and Development Expenses

Research and development costs are expensed as incurred and consist of direct and overhead-related expenses. Expenditures to acquire technologies, including licenses,state net operating loss carry forwards which are utilizedsignificantly limited to the Company following an ownership change as defined by Internal Revenue Code Section 382.

We account for income taxes in researchaccordance with ASC 740Income Taxes which provides for deferred taxes using an asset and developmentliability approach. We recognized deferred tax assets and liabilities for the expected future tax consequences of events that have no alternative future use are expensed when incurred. Technology we develop for usebeen in our products is expensed as incurred until technological feasibility has been established afterconsolidated financial statements and income tax returns. Deferred tax assets and liabilities are determined based on the difference between our consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets when it is capitalized and depreciated.more likely than not that a tax benefit will not be realized.

Stock-based Compensation

We account for stock-based compensation in accordance with Accounting Standards Codification (“ASC”) 718 - Compensation - Stock Compensation for all share-based payments, based on the grant-date fair value estimateduncertain tax positions in accordance with the provisions of ASC 718740. When uncertain tax positions exist, we recognize the tax benefit from an uncertain tax position only if it is recognizedmore likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. Estimated interest and penalties related to uncertain tax positions are included as a component of interest expense and general and administrative expense, respectively. We had no unrecognized tax benefits or uncertain tax positions for any periods presented.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“TCJA”) was signed into law. In December 2017, the SEC issued Staff Accounting Bulletin 118 (“SAB 118”) to provide clarification in implementing the TCJA when registrants do not have the necessary information available to complete the accounting for an element of the TCJA in the period of its enactment. SAB 118 provides for tax amounts to be classified as provisional and subject to remeasurement for up to one year from the enactment date for such elements when the accounting effect is not complete but can be reasonably estimated. We consider our estimates of the tax effects of the TCJA on the components of our tax provision to be reasonable and no provisional estimates subject to remeasurement will be necessary to complete the accounting.

We file U.S. federal income and Maryland state tax returns. There are currently no income tax examinations underway for these jurisdictions. However, tax years from and including 2014 remain open for examination by federal and state income tax authorities.

During the year ended December 31, 2017, we incurred operating losses of approximately $606,400. However, we recorded no income tax benefit for the approximately $347,500 ($95,632 net of tax) of general and administrative expenses treated as deferred start-up expenditures for tax purposes and approximately $258,600 ($71,155 net of tax) of tax losses resulting in tax loss carryforwards. The net operating loss carry forwards are available for application against future taxable income for 20 years expiring in 2037. Tax losses incurred after December 31, 2017 have an indefinite carry forward period. However, the tax loss incurred after December 31, 2017 and carried forward can only offset 80 percent of future taxable income. The benefit associated with the net operating loss carry forward will more likely than not go unrealized unless future operations are successful. Since the success of future operations is indeterminable, the potential benefits resulting from these net operating losses have not been recorded in the consolidated financial statements. As of December 31, 2016 and through October 4, 2017, the Company had no net operating losses for federal and state income tax purposes since Promet’s members were taxed separately on their proportionate share of Promet’s income, deductions, losses and credits.

Clinical Trial Accruals / Research and Development. As part of the process of preparing our consolidated financial statements, we are required to estimate expenses resulting from our obligations under contracts with vendors, CRO’s and consultants and under clinical site agreements related to conducting our clinical trials. The financial terms of these contracts vary and may result in payment flows that do not match the period over which materials or services are provided under such contracts.

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 series are recorded as prepaid expenses until the services are rendered.

Our clinical trial 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. During a clinical trial, we will adjust the clinical expense over the requisite service period.

The fair valuerecognition if actual results differ from estimates. We make estimates of accrued expenses as of each balance sheet date based on the fact and circumstances known at that time. Our clinical trial accruals are partially dependent on the accurate reporting by the CRO and other third party vendors. Although we do not expect estimates to differ materially from actual amounts, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that be too high or too low for any reporting period.

We expense research and development costs as they are incurred.

Valuation of Intangible Assets.Our intangible assets consist of the capitalized costs of $11,038,929, including transaction costs of $1,782, associated with the exercise of the option grantto acquire the exclusive license from CoNCERT related to patent rights and know-how to develop and commercialize compounds and products for PCS-499 and each metabolite thereof and the related income tax effects. The capitalized costs include $3,037,147 associated with the initial recognition of an offsetting deferred tax liability related to the acquired temporary difference for an asset purchased that is estimated using the Black-Scholes option-pricing model.  We account for equity instruments issued to non-employeesnot a business combination and has a nominal tax basis in accordance with ASC 740-10-25-51Income Taxes. In accordance with ASC Topic 730,Research and Development, we capitalized the provisionscosts of ASC 718 which requiresacquiring the exclusive license rights to PCS-499 as the exclusive license rights represent intangible assets to be used in research and development activities that such equity instruments behave future alternative uses. We had no recorded at their fair value on the measurement date.intangible assets as of December 31, 2017.

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Other than the performance option grants issuedWe used a market approach to Mr. Giles in connection with the asset acquisition dated April 15, 2011, all stock options issued to date by the Company were issued during the period beginning October 2011 and ending in August 2012.  During this period, the Company made two private placements of its preferred stock, one on October 21, 2011 and one on August 6, 2012.  Both private placements were priced at $2.00 per share and each share of preferred stock converts on a one to one basis into one share of common stock upon completion of the proposed offering.  Given that the share price of these private placements represents, in managements view, the best indication ofestimate the fair value of the Company’s common stock priorissued to CoNCERT in this transaction. Our estimate was based on the proposed offering, we utilized a $2.00 estimatefinal negotiated number of fair value for a shareshares of stock issued and the volume weighted average price of our common stock for all options issued duringquoted on the OTCQB over a 45 day period from October 2011 to August 2012.  The Company’s proposes offering is priced at $5.15 per sharepreceding the mid-February 2018 finalized negotiation of common stock.  Significant factors contributingthe modification to the difference betweenoption and license agreement with CoNCERT. We believe the $2.00 estimatedfair values used to record intangible assets acquired in this transaction are based upon reasonable estimates and assumptions given the facts and circumstances as of the related valuation dates.

We determined our intangible assets to have finite useful lives and review them for impairment when facts or circumstances suggest that the carrying value of these assets may not be recoverable.

Stock-Based Compensation: As of March 31, 2018, no stock-based compensation was outstanding. We account for the cost of employee services received in exchange for the award of equity instruments based on the fair value of our common stock at the timeaward, determined on the date of issuance of the options in question and the offering price of $5.15 include the following:

·

We have made progress in building out our management team.  During the third quarter of 2012 we hired our Chief Financial Officer and our VP of Sales.  We also entered into a consulting agreement with a government procurement specialist and an arrangement with a full-service marketing firm.  Finally, we completed the hiring of our first demonstration team of employees who will travel the country demonstrating the proper use of the Heatwurx equipment.

·

We have strengthened our financial position.  With the proceeds from the Series C preferred stock private placement in August 2012, we repaid the senior secured promissory note in the amount of $1,500,000.

Other significantgrant. Significant assumptions utilized in determining the fair value of our stock options includedinclude the volatility rate, estimated term of the options, risk-free interest rate and forfeiture rate. In order to estimate the volatility rate at each issuance date, given that the Company has not established a historical volatility rate as it has been a private company through the filing date, management reviewed volatility rates for a number of companies with similar manufacturing operations to arrive at an estimated volatility rate for each option grant.  The term of the options was assumed towill be five years, which isbased on the contractual term of the options.options as determined by the Board of Directors pursuant to our equity incentive plan. The risk-free interest rate was determined utilizingexpense is to be recognized over the treasury rate with a maturity equalperiod during which an employee is required to provide services in exchange for the estimated term ofaward. We estimate forfeitures at the option grant.  Finally, management assumed a zero forfeiture rate as the options granted were either fully-vested upon the datetime of grant and makes revisions, if necessary, at each reporting period if actual forfeitures differ from those estimates. We have not estimated future unvested forfeitures since there were no option grants outstanding at March 31, 2018 or had relatively short vesting periods.  As such, management does not currently believe that any of the options granted will be forfeited.  We will monitor actual forfeiture rates, if any, and make any appropriate adjustments necessary to our forfeiture rate in the future.

December 31, 2017.

Non-employee share-based compensation chargesawards generally are immediately vested and have no future performance requirements by the non-employee and the total share-based compensation charge is recorded in the period of the measurement date.

Impairment of Long-Lived Assets

We review long-lived assets for impairment on an annual basis, during the fourth quarter or on an interim basis if an event occurs that might reduce therecord equity instruments at their fair value on the measurement date by utilizing the Black-Scholes option-pricing model. Stock Compensation for all share-based payments, is recognized as an expense over the requisite service period.

Our equity incentive plan approved by the Heatwurx Board of Directors and stockholders in October 2012 has 257,143 shares of common stock reserved for future issuance. The plan is currently being reviewed by our Board of Directors and may be amended or terminated. Amendments are subject to stockholder approval to the extent required by applicable laws and regulations. Unless terminated sooner, the plan will automatically terminate on April 15, 2021. There are currently no outstanding option grants under the plan.

Recently Issued Accounting Pronouncements

See Note 1 to our consolidated financial statements beginning on page F-39 of this prospectus for a description of recent accounting pronouncements applicable to our consolidated financial statements.

Jobs Act Accounting Election

We are an “emerging growth company” as that term is defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Although Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (i.e., those that have not had a registration statement declared effective under the Securities Act, or companies that do not have a class of securities registered under the Exchange Act) are required to comply with such assets below their carrying values. An impairment loss wouldnew or revised financial accounting standards, we have elected to opt out of this exemption. We intend to comply with new or revised financial accounting standards as they become applicable to similar public companies.

DESCRIPTION OF BUSINESS

Overview

Processa is an emerging pharmaceutical company focused on the clinical development of drug products that are intended to improve the survival and/or quality of life for patients who have a high unmet medical need. Within this group of pharmaceutical products, we currently are developing one product for two indications (i.e., the use of a drug to treat a particular disease) and searching for additional products for our portfolio.

Part of our business strategy is:

Processa’s lead product, PCS-499, is an oral tablet that is an analog of an active metabolite of an already approved drug. The advantage of PCS-499 is that it potentially may work in many conditions because it has multiple pharmacological targets that it affects that are important in the treatment of these conditions. The compound has previously been shown to be recognizedsafe and tolerable with a trend toward efficacy in diabetic nephropathy. Based on the pharmacological activity, Processa has identified other unmet medical need conditions where the use of PCS-499 may result in clinical efficacy. These include NL and RIF in head and neck cancer patients. NL is a chronic, disfiguring condition for which most patients do not have any treatment options. It develops more commonly in women than in men on the lower extremities, and ulceration can occur in approximately 30% of NL patients, which may lead to more severe complications, such as deep tissue infections and osteonecrosis that can threaten life of the limb. PCS-499 had previously been investigated for a different indication in Phase 2 studies before we exercised an option to license PCS-499 from CoNCERT Pharmaceuticals in March 2018. Based on the diverse pharmacological activity of PCS-499, the Processa team has defined a strategy to develop this product in two indications where physicians and patients seek significant medical help. PCS-499 will be investigated for the treatment of two conditions that occur as a result of multiple pathophysiological changes, NL and the adverse effects associated with radiation therapy in the treatment of head and neck cancer. Besides the diverse pharmacological properties of PCS-499 targeting many of the physiological changes that occur for these two indications, an analog drug with similar pharmacology, presently approved for a different indication, has been successfully used in some patients for the treatment of these indications but cannot be used in many patients because it has dose limiting side effects, not allowing for higher doses to be administered to obtain adequate efficacy. The PCS-499 dose limiting side effects appear to occur at a much higher dose based on the difference betweenexisting clinical and pre-clinical data for PCS-499, allowing physicians to potentially increase the carrying valuedose to effectively treat significantly more patients with these two conditions. These two indications do not have any FDA-approved treatments, and have the potential to seriously affect a patient’s day-to-day quality of life.

Our team had a successful pre-IND (Investigating New Drug) meeting with the FDA on NL in October 2017, defining the next steps to move PCS-499 into Phase 2 studies and the path to eventual approval. Processa has also entered into an agreement with Integrium, LLC (“Integrium”), a CRO, to conduct the planned Phase 2 clinical study to further evaluate PCS-499 for the treatment of NL. Integrium is a full-service Clinical Proof of Concept firm based in Tustin, California, that specializes in a wide range of therapeutic areas including cardiovascular, metabolic disease and dermatology research. Enrollment in the study is planned on start in late 2018.