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RBSH Rebus

Filed: 12 Nov 21, 4:36pm

 

 

 

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark one)

 

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended September 30, 2021

 

Or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 000-55331

 

REBUS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware 20-0438951
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)

 

2629 Townsgate Road, Suite 215  
Westlake Village, CA 91361
(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code (818) 661-6302

 

Inspyr Therapeutics, Inc.

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Class Trading Symbol Name of Each Exchange on Which Registered
N/A N/A N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐Accelerated filer ☐
Non-accelerated filerSmaller reporting company
Emerging Growth Company  

 

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 pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ Yes ☒ No

 

As of October 31, 2021, the issuer had 10,309,212 common shares, $0.0001 par value, issued and outstanding.

 

 

 

 

 

Table of Contents

 

  Page
   
PART IFINANCIAL INFORMATION 
   
Item 1.Condensed Consolidated Financial Statements (unaudited)1
   
 Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 20201
   
 Condensed Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2021 and 20202
   
 Condensed Consolidated Statements of Stockholders’ Deficit (unaudited) for the three and nine months ended September 30, 2021 and 20203
   
 Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2021 and 20204
   
 Notes to Unaudited Condensed Consolidated Financial Statements5
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations19
   
Item 3.Quantitative and Qualitative Disclosures about Market Risk26
   
Item 4.Controls and Procedures26
   
PART IIOTHER INFORMATION 
   
Item 1.Legal Proceedings27
   
Item 1A.Risk Factors27
   
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds40
   
Item 3.Defaults Upon Senior Securities40
   
Item 4.Mine Safety Disclosure40
   
Item 5.Other Information40
   
Item 6.Exhibits40

  

 i 

 

 

ADVISEMENT

 

We urge you to read this entire Quarterly Report, including the financial statements and related notes included herein as well as our 2020 Annual Report on Form 10-K for the year ended December 31, 2020, which also includes “Risk Factors,” filed with the United States Securities and Exchange Commission or SEC on March 31, 2021. As used in this Quarterly Report, unless the context otherwise requires, the words “we,” “us,” “our,” “the Company,” “Rebus Holdings,” “Rebus,” and “registrant” refer to Rebus Holdings, Inc.(fka Inspyr Therapeutics, Inc.). Also, any reference to “common stock “or “common shares” refers to our $0.0001 par value common stock. The information contained herein is current as of the date of this Quarterly Report (September 30, 2021), unless another date is specified. Also, any reference to “preferred stock” or “preferred shares” refers to our $0.0001 par value Series A preferred stock, our $0.0001 par value series B preferred stock, our $0.0001 par value Series C preferred stock, our $.0.0001 par value Series D preferred stock, our $0.0001 par value Series E Preferred Stock, and our $0.0001 par value Series F Preferred Stock, unless specified otherwise. All references to common stock, share and per share amounts have been retroactively restated to reflect the 1:75 reverse stock split that became effective on October 12, 2021 as if it had taken place as of the beginning of the earliest period presented.

 

We prepare our interim financial statements in accordance with United States generally accepted accounting principles. Our financials and results of operation for the three and nine month periods ended September 30, 2021 is not necessarily indicative of our prospective financial condition and results of operations for the pending full fiscal year ending December 31, 2021. The interim financial statements and other information presented in this Quarterly Report should be read together with the reports, statements and information filed by us with the United States Securities and Exchange Commission or SEC.

 

 ii 

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report includes “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements relate to our business development plans, clinical trials, regulatory reviews, timing, strategies, expectations, anticipated expense levels, business prospects and positioning with respect to the market for our proposed products, business outlook, technology spending and various other matters (including contingent liabilities and obligations and changes in accounting policies, standards and interpretations), express our current intentions, beliefs, expectations, strategies or predictions, as well as historical information. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, to be materially different from anticipated results, performance or achievements expressed or implied by such forward-looking statements. When used in this report, statements that are not statements of current or historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “plan,” “intend,” “may,” “will,” “expect,” “believe,” “could,” “anticipate,” “estimate,” or “continue” or similar expressions or other variations or comparable terminology are intended to identify such forward-looking statements. Although we believe that the assumptions on which the forward-looking statements contained herein are based are reasonable, any of those assumptions could prove to be inaccurate given the inherent uncertainties as to the occurrence or nonoccurrence of future events. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Our future operating results are dependent upon many factors which are outside our control. You should not place undue reliance on forward-looking statements. Forward-looking statements may not be realized due to a variety of factors, including, without limitation, our ability to:

 

 continue to increase our corporate operations;
   
 attract, build and retain a senior management team;

 

 manage our business given continuing operating losses and negative cash flows;
   
 obtain sufficient capital or a strategic business arrangement to fund our operations and expansion plans;
   
 build the infrastructure necessary to support the growth of our business;
   
 manage competitive factors and developments beyond our control;
   
 manage scientific and medical developments which may be beyond our control;
   
 manage the governmental regulation of our business including state, federal and international laws;
   
 maintain and protect our intellectual property;
   
 obtain patents based on our current and/or future patent applications;
   
 obtain and maintain other rights to technology required or desirable to conduct or expand our business;
   
 achieve any potential strategic benefits of licensing transactions, collaborations, acquisitions, or in-licensing of new technologies, if any; 
   
 successfully integrate the assets previously licensed to Ridgeway Therapeutics, Inc. pursuant to the termination of such license in October 2020; and
   
 manage any other factors discussed in the “Risk Factors” section, and elsewhere in this Quarterly Report.

 

All forward-looking statements attributable to us are expressly qualified in their entirety by these and other factors. We undertake no obligation to update or revise these forward-looking statements, whether to reflect events or circumstances after the date initially filed or published, to reflect the occurrence of unanticipated events or otherwise, except to the extent required by federal securities laws. The risks discussed in this report should be considered in evaluating our business and future prospects. 

 

 iii 

 

 

PART I

FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS

 

REBUS HOLDINGS, INC.

(FKA INSPYR THERAPEUTICS, INC.)

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

   

         
  September 30,  December 31, 
  2021  2020 
  (Unaudited)    
ASSETS        
         
Current assets:        
Cash $995  $404 
Total current assets  995   404 
         
Total assets $995  $404 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
         
Current liabilities:        
Accounts payable $1,931  $2,261 
Accrued expenses  1,986   1,940 
Convertible debentures, net of unamortized discount of $458 and $488  440   1,878 
Derivative liability  1,958   6,828 
Total current liabilities  6,315   12,907 
Total liabilities  6,315   12,907 
         
Commitments and contingencies (Note 7)  -   - 
         
Stockholders’ deficit:        
Convertible preferred stock, undesignated, par value $.0001 per share; 29,978,846 shares authorized, 0 shares issued and outstanding, respectively  -   - 
Convertible preferred stock Series A, par value $.0001 per share; 1,854 shares authorized, 134 shares issued and outstanding, respectively  -   - 
Convertible preferred stock Series B, par value $.0001 per share; 1,000 shares authorized, 71 shares issued and outstanding, respectively  -   - 
Convertible preferred stock Series C, par value $.0001 per share; 300 shares authorized, 290 shares issued and outstanding, respectively  -   - 
Convertible preferred stock Series D, par value $.0001 per share; 5,000 shares authorized, 5,000 shares issued and outstanding, respectively  -   - 
Convertible preferred stock Series E, par value $.0001 per share; 5,000 shares authorized, 5,000 shares issued and outstanding, respectively  -   - 
Convertible preferred stock Series F, par value $.0001 per share; 8,000 shares authorized, 8,000 shares issued and outstanding, respectively  -   - 
Common stock, par value $.0001 per share; 1,000,000,000 shares authorized, 9,579,879 and 2,478,848 shares issued and outstanding, respectively  1   - 
Additional paid-in capital  59,008   54,472 
Accumulated deficit  (64,329)  (66,975)
         
Total stockholders’ deficit  (5,320)  (12,503)
         
Total liabilities and stockholders’ deficit $995  $404 

  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 1 

 

 

REBUS HOLDINGS, INC.

(FKA INSPYR THERAPEUTICS, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(in thousands, except share and per share data)

  

                 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
  2021  2020  2021  2020 
             
Operating expenses:                
Research and development $97  $11  $190  $33 
General and administrative  118   126   371   344 
Total operating expenses  215   137   561   377 
                 
Loss from operations  (215)  (137)  (561)  (377)
                 
Other income (expense):                
Gain on change in fair value of derivative liability  6,660   2,024   3,001   353 
Gain on conversion of debt  (48)  240   1,130   398 
Interest expense, net  (272)  (21)  (924)  (169)
                 
Income (loss) before provision for income taxes  6,125   2,106   2,646   205 
                 
Provision for income taxes  -   -   -   - 
                 
Net income (loss) $6,125  $2,106  $2,646  $205 
                 
Net income (loss) per common share, basic $0.81  $11.84  $0.39  $2.25 
Net income (loss) per common share, diluted $(0.01) $(0.02) $(0.03) $(0.05)
                 
Weighted average shares outstanding, basic  7,612,241   181,774   6,740,889   94,764 
Weighted average shares outstanding, diluted  38,536,773   7,230,566   20,928,472   7,143,556 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 2 

 

 

REBUS HOLDINGS, INC.

(FKA INSPYR THERAPEUTICS, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(unaudited)

(in thousands, except share and per share data)

  

                             
  Convertible        Additional       
  Preferred Stock  Common Stock  Paid-in  Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Deficit  Deficit 
Balance, December 31, 2019  5,495  $             -   12,160  $         -  $51,957  $(60,680) $(8,723)
                             
Conversion of notes  -   -   58,378   -   730   -   730 
                             
Net loss  -   -   -   -   -   (726)  (726)
                             
Balance, March 31, 2020 (unaudited)  5,495   -   70,538   -   52,687   (61,406)  (8,719)
                             
Sale of preferred stock  5,000   -   -   -   5   -   5 
                             
Net loss  -   -   -   -   -   (1,175)  (1,175)
                             
Balance, June 30, 2020 (unaudited)  10,495   -   70,538   -   52,692   (62,581)  (9,889)
                             
Conversion of notes  -   -   473,186   -   570   -   570 
                             
Net income  -   -   -   -   -   2,106   2,106 
                             
Balance, September 30, 2020 (unaudited)  10,495  $-   543,724  $-  $53,262  $(60,475) $(7,213)

 

  Convertible        Additional       
  Preferred Stock  Common Stock  Paid-in  Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Deficit  Deficit 
Balance, December 31, 2020  18,495  $        -   2,478,848  $         -  $54,472  $(66,975) $(12,503)
                             
Conversion of notes  -   -   4,248,864   1   3,462   -   3,463 
                             
Director compensation waived  -   -   -   -   336   -   336 
                             
Net loss  -   -   -   -   -   (20,635)  (20,635)
                             
Balance, March 31, 2021 (unaudited)  18,495   -   6,727,712   1   58,270   (87,610)  (29,339)
                             
Conversion of notes  -   -   378,167   -   232   -   232 
                             
Net income  -   -   -   -   -   17,156   17,156 
                             
Balance, June 30, 2021 (unaudited)  18,495   -   7,105,879   1   58,502   (70,454)  (11,951)
                             
Conversion of notes  -   -   2,474,000   -   506   -   506 
                             
Net income  -   -   -   -   -   6,125   6,125 
                             
Balance, September 30, 2021 (unaudited)  18,495  $-   9,579,879  $1  $59,008  $(64,329) $(5,320)

  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 3 

 

  

REBUS HOLDINGS, INC.

(FKA INSPYR THERAPEUTICS, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

         
  Nine Months Ended
September 30,
 
  2021  2020 
Cash flows from operating activities:        
Net income $2,646  $205 
Adjustments to reconcile net income (loss) to net cash used in operating activities:        
Gain on change in fair value of derivative liability  (3,001)  (353)
Gain on conversion of debt  (1,130)  (398)
Amortization of debt discount  924   167 
Increase in operating liabilities:        
Accounts payable and accrued expenses  152   134 
Cash used in operating activities  (409)  (245)
         
Cash flows from investing activities:        
Cash used in investing activities  -   - 
         
Cash flows from financing activities:        
Proceeds from convertible notes  1,000   250 
Proceeds from sale of preferred stock  -   5 
Cash provided by financing activities  1,000   255 
         
Net increase in cash and restricted cash  591   10 
Cash and restricted cash, beginning of period  404   23 
         
Cash and restricted cash, end of period $995  $33 

  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 4 

 

 

REBUS HOLDINGS, INC.

(FKA INSPYR THERAPEUTICS, INC.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021 AND 2020

 

NOTE 1 – BACKGROUND

 

Rebus Holdings, Inc. (“we”, “us”, “our company”, “our”, “Rebus,” “Rebus Holdings,” or the “Company”) (formerly known as Inspyr Therapeutics, Inc., see Note 10 Subsequent Events) was formed under the laws of the State of Delaware in November 2003, and has its principal office in Westlake Village, California. We are focused on the research and development of novel targeted precision therapeutics for the treatment of cancer. 

 

Our approach utilizes our proprietary delivery technology to better enhance immuno-modulation for improved therapeutic outcomes. Our potential first-in-class immune-oncology lead asset, RT-AR001, an adenosine receptor A2B antagonist, is differentiated by its novel microparticle formulation that allows for better tumor infiltration and enhanced outcomes when administered intra-tumorally. Our patented portfolio of adenosine receptor antagonists provides flexibility to optimize treatment based on the specific targets found in each type of cancer. 

 

The adenosine receptor modulators include A 2B antagonists, dual A 2A /A 2B antagonists, and A 2A antagonists that have broad development applicability including indications within immuno-oncology and inflammation. Adenosine is implicated in immunosuppression in the tumor microenvironment. Adenosine receptor antagonists may boost the host immune response against the tumor as a single-agent and in combination with other existing immuno-oncology agents leading to enhanced tumor killing and inhibition of metastasis. Adenosine also has anti-inflammatory properties in the acute and chronic setting. Adenosine receptor antagonists may promote a decreased inflammatory response and can potentially treat a broad range of inflammatory and autoimmune based diseases and conditions (e.g., rheumatoid arthritis, joint injury, Crohn’s disease, psoriasis) as well as improve wound healing and decrease pain.

 

Pursuant to our recent termination of license with Ridgeway Therapeutics, Inc., a Delaware Corporation (“Ridgeway”), we reacquired the rights to certain intellectual property, discussed above, and are currently focusing on a pipeline of small molecule adenosine receptor modulators. In October 2020, pursuant to the cancellation of a license agreement whereby we previously licensed US Patent 9,593,118, we reacquired the exclusive right to such patent that covers both A2B and dual A2A/A2B antagonists. Accordingly, going forward our major focus will be to: (i) further characterization of the anti-cancer activity of our unique pipeline delivery platform containing A2B and dual A2A/A2B antagonists, leading to selection of a clinical candidate or candidates for an Investigative New Drug or IND enabling studies; and (ii) licensing and/or partnering our delivery platform and the A2B and dual A2A/A2B antagonists for further development.

 

Our ability to execute the business plan is contingent upon our ability to raise the necessary funds. During March 2020, we sold approximately $250,000 of debt securities and in October 2020, we sold $500,000 of debt securities for cash. In January 2021, we sold an additional $500,000 of debt securities for cash and in June 2021, we sold an additional $500,000 of debt securities for cash. We are currently using such funds to maintain our SEC reporting requirements, pay legal accounting and other professional fees, and to retain consultants and other personnel to develop the adenosine A2R antagonists and in preparation for an IND filing related to our unique delivery platform and portfolio of adenosine A2R antagonists for the treatment of certain solid tumors. Should we fail to further raise sufficient funds to execute our business plan, our priority would be to maintain our intellectual property portfolio and seek business development opportunities with potential development partners and/or acquirors.

 

 5 

 

 

Reverse Stock Split

 

As further described in Note 10, Subsequent Events, pursuant to a written consent, Rebus’ shareholders approved a proposal authorizing the Board of Directors to effect a reverse stock split of the Company’s common stock (“Common Stock”).

 

On September 1, 2021, the Board of Directors approved a one-for-seventy-five (1-for-75) reverse stock split of the Company’s Common Stock (“Reverse Stock Split”). The Reverse Stock Split became effective with the Secretary of State of Delaware as of 4:59 p.m. Eastern Time on October 5, 2021, and the Company began trading on a post Reverse Stock Split basis at the market open on October 12, 2021. As a result of the Reverse Stock Split, each of the holders of the Company’s Common Stock received one (1) new share of Common Stock for every seventy-five (75) shares such shareholder held immediately prior. No fractional shares were issued as a result of the Reverse Stock Split. Any fractional shares that would have otherwise resulted from the Reverse Stock Split will be rounded up to the next whole number of shares. The Reverse Stock Split also affected the Company’s outstanding stock options, warrants and other exercisable or convertible instruments and resulted in the shares underlying such instruments being reduced and the exercise price being increased proportionately to the Reverse Stock Split ratio. All share and per share data have been retroactively restated in the accompanying consolidated financial statements and footnotes for all periods presented to reflect the effects of the Reverse Stock Split.

 

Termination of License Agreement

 

On October 5, 2020, the Company entered into an agreement with Ridgeway(“Termination Agreement”) whereby the parties terminated the licensing agreement previously entered into on August 3, 2018 (“Licensing Agreement”), The Company had previously licensed certain technologies related to targeting adenosine receptor antagonists for the treatment of cancer (the “Licensed Assets”). As a result of the Termination Agreement, the Company reacquired full ownership and worldwide rights to all of the Licensed Assets as well as any improvements made thereto.

 

In exchange for entering into the Termination Agreement, the Company issued to Ridgeway: (i) sixty-five million shares Common Stock, and (ii) 8,000 shares of Series F 0% Convertible Preferred Stock (“Series F Preferred Stock”). Additionally, the Company paid expenses and costs of Ridgeway’s aggregating approximately $25,000.

 

Pursuant to a Certificate of Designation of the Series F Preferred Stock, each share of Series F Preferred Stock has a stated value of $10.00 per share and is convertible into Common Stock at any time at the election of the holder. In the aggregate, all of the Series F Preferred Stock issued to Ridgeway is convertible into such number of shares of Common Stock equal to eighty percent (80%) of the issued and outstanding shares of Common Stock, post-conversion, on the conversion date (taking into effect any forward or reverse stock splits or consolidations). The Series F Preferred Stock votes on an as if converted to Common Stock basis. Additionally, upon the Company’s outstanding Convertible Debentures (as such term is defined in the Certificate of Designation) being terminated, converted, or otherwise extinguished, the Series F Preferred Stock will automatically convert into Common Stock.

 

Pursuant to the Termination Agreement, in the event that the Company is unable to secure equity financing resulting in aggregate gross proceeds to the Company of at least $5,000,000 by October 5, 2023, or in the event that the Company ceases its operations, then the Termination Agreement will be deemed terminated and the Licensing Agreement will be reinstated in exchange for the return of the Common Shares and Series F Preferred Stock issued to Ridgeway.

 

As a result of the issuance of the Common Shares and Series F Preferred Stock, Ridgeway became the owner of approximately 54.14% of the Company’s issued and outstanding Common Stock. Furthermore, by virtue of the issuance of the Series F Preferred Stock, Ridgeway will vote on an as if converted to common stock basis which shall be equal to eighty percent (80%) of the issued and outstanding Common Stock post-conversion. Accordingly, the Board of Directors determined that a change in control of the registrant has occurred. The Company did not have a prior relationship with Ridgeway, or any of its principals, except pursuant to the terms contained in the Termination Agreement and its previous relationship under the Licensing Agreement. 

 

 6 

 

 

NOTE 2 – MANAGEMENT’S PLANS TO CONTINUE AS A GOING CONCERN 

 

Basis of Presentation

 

We have prepared our unaudited condensed consolidated financial statements on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have incurred losses from operations since inception, we have a working capital deficit of $5.3 million and we have an accumulated deficit of $64.3 million as of September 30, 2021. We anticipate incurring additional losses for the foreseeable future until such time, if ever, that we can generate significant sales from our therapeutic product candidates which are currently in development, or we enter into cash flow positive business development transactions.

 

To date, we have generated no sales or revenues, have incurred significant losses and expect to incur significant additional losses as we advance our product candidates through development. Consequently, our operations are subject to all the risks inherent in the establishment of a pre-revenue business enterprise as well as those risks associated with a company engaged in the research and development of pharmaceutical compounds.

 

Our cash balances at September 30, 2021 were approximately $995,000, representing 100% of our total assets. Based on our current expected level of operating expenditures, and including $500,000 that we raised in January 2021 and $500,000 that we raised in June 2021, pursuant to the sale of our senior convertible debentures, we expect to be able to fund our operations into the second quarter of 2022. We will require additional cash to fund and continue our operations beyond that point. This period could be shortened if there are any unanticipated increases in planned spending on development programs or other unforeseen events. We anticipate raising additional funds through public or private sales of debt or equity securities, or some combination thereof. There is no assurance that any such financing will be available when needed in order to allow us to continue our operations, or if available, on terms favorable or acceptable to us. 

 

In the event additional financing is not obtained, we may pursue cost cutting measures as well as explore the sale of assets to generate additional funds. If we are required to significantly reduce operating expenses and delay, reduce the scope of, or eliminate any of our development programs or clinical trials, these events could have a material adverse effect on our business, results of operations, and financial condition. These factors raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

 

Our current cash level raises substantial doubt about our ability to continue as a going concern past the second quarter of 2022. If we do not obtain additional funds by such time, we may no longer be able to continue as a going concern and will cease operation which means that our shareholders will lose their entire investment.

 

NOTE 3 – SUMMARY OF CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements are unaudited. The unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

 

These interim consolidated financial statements for the three and nine months ended September 30, 2021 and 2020 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows of the Company for the periods presented. The results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future period. All references to September 30, 2021 and 2020 financials in these footnotes refer to unaudited consolidated financial statements as of those dates.

 

 7 

 

 

These unaudited condensed consolidated financial statements should be read in conjunction with our audited financial statements and the notes thereto for the year ended December 31, 2020, included in the Company’s annual report on Form 10-K filed with the SEC on March 31, 2021.

 

The consolidated balance sheet as of December 31, 2020 has been derived from the audited consolidated financial statements at such date but do not include all disclosures required by the accounting principles generally accepted in the United States of America.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the parent company, Rebus Holdings, Inc., (fka Inspyr Therapeutics, Inc.) and its wholly-owned subsidiary, Lewis & Clark Pharmaceuticals, Inc. All significant intercompany accounts and transactions have been eliminated.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Significant estimates include the fair value of derivative instruments, stock-based compensation, recognition of clinical trial costs and other accrued liabilities. Actual results may differ from those estimates.

 

Research and Development

 

Research and development costs are charged to expense as incurred. Our research and development expenses consist primarily of expenditures for pre-clinical research, toxicology and other studies, manufacturing, clinical trials, compensation and consulting costs associated therewith.  

 

We incurred research and development expenses of approximately $97,000 and $11,000 for the three months ended September 30, 2021 and 2020, respectively. We incurred research and development expenses of approximately $190,000 and $33,000 for the nine months ended September 30, 2021 and 2020, respectively.

 

Cash Equivalents

 

For purposes of the statements of cash flows, we consider all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents. We maintain our cash in bank deposit accounts which, at times, may exceed applicable government mandate insurance limits. We have not experienced any losses in our accounts. We did 0t have any cash equivalents at September 30, 2021 or December 31, 2020.

 

Concentrations of Credit Risk

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may exceed applicable government mandated insurance limits. Cash was $1.0 million and $0.4 million at September 30, 2021 and December 31, 2020, respectively. As of September 30, 2021 and December 31, 2020, there was no cash over the federally insured limit.

 

Loss per Share

 

Basic loss per share is calculated by dividing net loss and net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Basic and diluted loss per share are the same, in that any potential common stock equivalents would have the effect of being anti-dilutive in the computation of net loss per share.

 

 8 

 

 

The following potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding for the three and nine months ended September 30, 2021 and 2020, as they would be anti-dilutive:

 

Schedule of Anti dilutive Securities Excluded from Computation of Earnings Per Share        
  Three and Nine Months
Ended
September 30,
 
  2021  2020 
Shares underlying options outstanding  9   9 
Shares underlying warrants outstanding  53   53 
Shares underlying convertible preferred stock outstanding  95,250   3,739 
   95,312   3,801 

 

Diluted loss per share for the three and nine months ended September 30, 2021 and 2020 is calculated as follows:

 

Diluted loss per share                
  Three months
ended
  Three months
ended
  Nine months
ended
  Nine months
ended
 
  September 30,  September 30,  September 30,  September 30, 
  2021  2020  2021  2020 
Net income attributable to common shareholders $6,125  $2,106  $2,646  $205 
Income attributable to convertible instruments  (6,612)  (2,264)  (4,131)  (751)
Expense attributable to convertible instruments  272   21   924   169 
Diluted loss attributable to common shareholders $(215) $(137) $(561) $(377)
                 
Basic shares outstanding  7,612,241   181,774   6,740,889   94,764 
Dilutive convertible instruments  30,924,532   7,048,792   14,187,583   7,048,792 
Diluted shares outstanding  38,536,773   7,230,566   20,928,472   7,143,556 
                 
Diluted loss per share $(0.01) $(0.02) $(0.03) $(0.05)

 

Derivative Liability

 

The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company values its derivative liabilities using the Black-Scholes option valuation model. The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability in the statement of operations. 

 

Fair Value of Financial Instruments

 

Our short-term financial instruments, including cash, accounts payable and other liabilities, consist primarily of instruments with maturities of one year or less when acquired. We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts.

 

The derivative liabilities consist of our convertible notes and Series F preferred stock with variable conversion features. The Company uses the Black-Scholes option-pricing model to value its derivative liabilities which incorporate the Company’s stock price, volatility, U.S. risk-free interest rate, dividend rate, and estimated life.

 

Fair Value Measurements

 

The U.S. GAAP Valuation Hierarchy establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. 

 

 9 

 

 

The Company has recorded a derivative liability for its convertible notes and preferred stock with variable conversion features as of September 30, 2021 and 2020. The tables below summarize the fair values of our financial liabilities as of September 30, 2021 and December 31, 2020 (in thousands):

 

Schedule of fair values of financial liabilities                
  Fair Value at
September 30,
  Fair Value Measurement Using 
  2021  Level 1  Level 2  Level 3 
             
Convertible notes $542   0   0  $542 
Preferred stock  1,416   0   0   1,416 
Derivative liability $1,958  $0  $0  $1,958 

 

  Fair Value at
December 31,
  Fair Value Measurement Using 
  2020  Level 1  Level 2  Level 3 
             
Convertible notes $2,705   0   0  $2,705 
Preferred stock  4,123         4,123 
Derivative liability $6,828  $0  $0  $6,828 

 

The reconciliation of the derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):

 

Schedule of derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3)        
  Nine Months ended
September 30,
 
  2021  2020 
 
Balance at beginning of period $6,828  $1,785 
Additions to derivative instruments  1,354   167 
Reclassification on conversion  (3,223)  (766)
Gain on change in fair value of derivative liability  (3,001)  (353)
Balance at end of period $1,958  $833 

 

Recent Accounting Pronouncements

 

With the exception of those discussed below, there have not been any recent changes in accounting pronouncements and Accounting Standards Update (ASU) issued by the Financial Accounting Standards Board (FASB) during the nine months ended September 30, 2021 that are of significance or potential significance to the Company.

 

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

 

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NOTE 4 – SUPPLEMENTAL CASH FLOW INFORMATION

 

The following table contains additional information for the periods reported (in thousands).

 

Schedule of additional information of cash flow        
  Nine Months Ended
September 30,
 
  2021  2020 
Non-cash financial activities:        
Common stock issued on conversion of notes payable and derivative liability $4,202  $1,300 
Debentures converted to common stock  2,568   933 
Derivative liability extinguished upon conversion of notes payable  3,223   766 
Derivative liability issued  1,354   167 
Accounts payable paid through issuance of debentures  100   0 
Accrued directors fees forgiven and credited to paid in capital  336   0 

 

There was no cash paid for interest and income taxes for the nine months ended September 30, 2021 and 2020. 

 

NOTE 5 – ACCRUED EXPENSES

 

Accrued expenses consist of the following (in thousands):

 

Schedule of accrued expenses        
  September 30,
2021
  December 31,
2020
 
Accrued compensation and benefits $1,326  $1,326 
Accrued research and development  233   233 
Accrued other  427   381 
Total accrued expenses $1,986  $1,940 

 

NOTE 6 – DERIVATIVE LIABILITY

 

We account for equity-linked financial instruments, such as our convertible preferred stock, convertible debentures and our common stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the respective agreement. Equity-linked financial instruments are accounted for as derivative liabilities, in accordance with ASC Topic 815 – Derivatives and Hedging, if the instrument allows for cash settlement or issuance of a variable number of shares. We classify derivative liabilities on the balance sheet at fair value, and changes in fair value during the periods presented in the statement of operations, which is revalued at each balance sheet date subsequent to the initial issuance of the stock warrant.

 

We have issued convertible debentures and preferred stock which contain variable conversion features, anti-dilution protection and other conversion price adjustment provisions. As a result, the Company assessed its outstanding equity-linked financial instruments and concluded that the convertible notes and preferred stock are subject to derivative accounting. The fair value of the conversion feature is classified as a liability in the consolidated financial statements, with the change in fair value during the periods presented recorded in the consolidated statement of losses. 

 

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During the three months ended September 30, 2021 and 2020, we recorded income of approximately $6.7 million and $2.0 million, respectively, related to the change in fair value of the derivative liabilities during the periods. During the nine months ended September 30, 2021 and 2020, we recorded income of approximately $3.0 million and $0.4 million, respectively. For purpose of determining the fair market value of the derivative liability, the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuations of the derivatives at September 30, 2021 are as follows: 

 

Schedule of valuations of derivatives    
Volatility  121% - 182%
Expected term (years)  3 - 9 months 
Risk-free interest rate  0.04% – 0.05%
Dividend yield  None 

 

As of September 30, 2021 and December 31, 2020, the derivative liability recognized in the financial statements was approximately $2.0 million and $6.8 million, respectively. 

 

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

the Company currently does not have any ongoing leases for office space. It has availability to office space on an as needed basis. Its employees work on a remote basis.

 

There was 0 rent expense for the three and nine months ended September 30, 2021 and 2020.

 

Legal Matters

 

The Company is subject at times to legal proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity.

 

NOTE 8 – CAPITAL STOCK AND STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

As of September 30, 2021, there were outstanding (i) 133.8 134 shares of Series A Preferred Stock, (ii) 71 shares of Series B Preferred Stock, (iii) 290.4 290 shares of Series C Preferred Stock, (iv) 5,000 shares of Series D Preferred Stock, (v) 5,000 shares of Series E Preferred Stock, and (vi) 8,000 shares of Series F Preferred Stock.

 

Pursuant to a Certificate of Designation filed with the Delaware Secretary of State on October 6, 2020, each share of Series F Preferred Stock has a stated value of $10.00 per share and is convertible into Common Stock at any time at the election of the holder. We issued all 8,000 shares of the Series F stock to Ridgeway Therapeutics, Inc. in connection with the Termination Agreement described in Note 1. In the aggregate, all of the Series F Preferred Stock issued to Ridgeway is convertible into such number of shares of Common Stock equal to eighty percent (80%) of the issued and outstanding shares of Common Stock, post-conversion, on the conversion date (taking into effect any forward or reverse stock splits or consolidations). The Series F Preferred Stock votes on an as if converted to common stock basis. Additionally, upon the Company’s outstanding Convertible Debentures (as such term is defined in the Certificate of Designation) being terminated, converted, or otherwise extinguished, the Series F Preferred Stock will automatically convert into Common Stock.

 

As a result of past equity financings and conversions of debentures, the conversion prices of (i) our Series A Preferred Stock has been reduced to $29,812.50 per share at September 30, 2021, (ii) our Series B Preferred Stock has been reduced to $0.75 per share at September 30, 2021, (iii) 200 shares of our Series C preferred stock has been reduced to $1,125.00 per share at September 30, 2021, (iv) 90.43418 shares of our Series C Preferred Stock has been reduced to $562.50 per share at September 30, 2021

 

Common Stock

 

During the nine months ended September 30, 2021, we issued a total of 7,101,031 shares of common stock, valued at $4,201,812, upon the conversion of $2,568,048 principal amount of our convertible debentures. We recorded loss on conversion of debt of $47,872 and gain on conversion of debt of $1,129,632 during the three and nine months ended September 30, 2021, respectively.

 

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During the three months ended March 31, 2021, we entered into settlement and release agreements with two of our independent directors for the settlement of past due director fees and the mutual release of all claims. Pursuant to the agreements, the directors agreed to waive an aggregate of $435,667 in outstanding director fees in exchange for the following: (i) the aggregate payment of $100,000 (of which $50,000 was paid in November 2020 and $50,000 in February 2021) and (ii) immediately prior to the announcement that the Company has received approval from the FDA to commence its first Phase 1 clinical trial after March 1, 2021 (which has yet to occur), common stock purchase options with an aggregate Black Scholes’ value of $80,000, having an exercise price equal to the closing price on the day preceding the announcement, and a term of 10 years. The difference between the amount waived of $435,667 and the cash paid of $100,000 has been credited to paid in capital during the three months ended March 31, 2021. 

 

During the nine months ended September 30, 2020, we issued a total of 531,564 shares of common stock, valued at $1,300,653, upon the conversion of $932,935 principal amount of our convertible debentures. We recorded gain on conversion of debt of $240,356 and $398,323 during the three and nine months ended September 30, 2020, respectively.

 

NOTE 9 – CONVERTIBLE DEBENTURES AND NOTES

 

June 2021 Debenture

 

On June 18, 2021, the Company sold an aggregate of $600,000 of senior convertible debentures (“June Debentures”) for (i) $500,000 in cash and (ii) $100,000 in cancellation of outstanding indebtedness to existing accredited and institutional investors of the Company. The June Debentures (i) are non-interest bearing, (ii) have a maturity date of June 18, 2022, (iii) are convertible into shares of Common Stock at the election of the holders at any time, subject to a beneficial ownership limitation of 9.99%, and (iv) have a conversion price equal to the lesser of $24.75 and 85% of the lowest Volume Weighted Average Price (VWAP) during the five (5) trading days immediately prior to the conversion date, subject to adjustment, as described therein.

 

The June Debentures also contain provisions providing for an adjustment in the event of stock splits or dividends, and fundamental transactions. The investors also have the right to participate in subsequent rights offerings and pro rata distributions. Additionally, the June Debentures contains anti-dilution protection in the event of subsequent equity sales at a price that is lower than the then applicable conversion price until such time that the June Debentures are no longer outstanding. Additionally, the Company has the option to redeem some or all of the June Debentures for cash upon notice of twenty (20) trading days provided certain conditions are met by the Company as more fully described in the June Debentures.

 

We recorded an initial derivative liability of $644,457 related to the fair value of the derivative liability associated with the June Debentures. We recorded debt discount of $600,000, which will be amortized to interest expense over the term of the June Debentures, and we charged $44,457 to interest expense upon issue. We have amortized $155,000 and $175,000 of discount to interest expense during the three and nine months ended September 30, 2021, respectively. Unamortized discount at September 30, 2021 was $425,000.

 

January 2021 Debenture

 

On January 12, 2021, we sold a $500,000 senior convertible debenture (“January Debenture”) for (i) $500,000 for cash to an existing institutional investor of the Company. The January Debenture (i) is non-interest bearing, (ii) has a maturity date of January 12, 2022, (iii) is convertible into shares of Common Stock at the election of the holder at any time, subject to a beneficial ownership limitation of 9.99%, and (iv) has a conversion price equal to the lesser of $24.75 and 85% of the lowest VWAP during the five (5) trading days immediately prior to the conversion date, subject to adjustment, as described therein.

 

The January Debenture also contains provisions providing for an adjustment in the event of stock splits or dividends, and fundamental transactions. The investor also has the right to participate in subsequent rights offerings and pro rata distributions. Additionally, the January Debentures contains anti-dilution protection in the event of subsequent equity sales at a price that is lower than the then applicable conversion price until such time that the January Debenture is no longer outstanding. Additionally, the Company has the option to redeem some or all of the January Debenture for cash upon notice of twenty (20) trading days provided certain conditions are met by the Company as more fully described in the January Debenture.

 

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During the nine months ended September 30, 2021, $412,480 of January Debenture has been converted to Common Stock and $87,520 remained outstanding at September 30, 2021.

 

We recorded an initial derivative liability of $709,835 related to the fair value of the derivative liability associated with the January debenture. We recorded debt discount of $500,000, which will be amortized to interest expense over the term of the January debenture, and we charged $209,835 to interest expense upon issue. We have amortized $94,404 and $326,253 of discount to interest expense during the three and nine months ended September 30, 2021, respectively, and $148,842 has been charged off against gain upon the conversion of the October Debentures during the three and nine months ended September 30, 2021. Unamortized discount at September 30, 2021 was $24,905.

 

October 2020 Debentures

 

On October 23, 2020, the Company sold an aggregate of $600,000 of senior convertible debentures (“October Debentures”) for (i) $500,000 in cash and (ii) $100,000 in cancellation of outstanding indebtedness to existing accredited and institutional investors of the Company. 

 

The October Debentures (i) are non-interest bearing, (ii) have a maturity date of October 23, 2021, (iii) are convertible into shares of Common Stock at the election of the holders at any time, subject to a beneficial ownership limitation of 9.99%, and (iv) have a conversion price equal to the lesser of (i) $24.75 and (ii) 85% of the lowest VWAP during the five trading days immediately prior to the date of conversion.

 

During the nine months ended September 30, 2021, $500,000 of October Debentures have been converted to common stock and $100,000 remains outstanding at September 30, 2021.

 

We had recorded debt discount of $600,000 related to the October Debentures, which will be amortized to interest expense over the term of the October Debentures. We have amortized $23,551 and $168,539 of discount to interest expense during the three and nine months ended September 30, 2021, and $0 and $311,111 has been charged off against gain upon the conversion of the October Debentures during the three and nine months ended September 30, 2021, respectively. Unamortized discount at September 30, 2021 was $7,850.

 

March 2020 Debentures

 

On March 6, 2020, the Company sold an aggregate of $250,000 of senior convertible debentures (the “March Debentures”) for cash to existing accredited institutional investors of the Company. The March Debentures (i) are non-interest bearing, (ii) have a maturity date of July 16, 2020 and (iii) are convertible into shares of Common Stock at the election of the holder at any time, subject to a beneficial ownership limitation of 9.99%. The March Debentures have a conversion price equal to the lesser of (i) $24.75 and (ii) 85% of the lowest VWAP during the five trading days immediately prior to the date of conversion. The maturity date of the debentures was extended to June 30, 2021.

 

The March Debentures were fully converted to Common Stock during the three months ended March 31, 2021.

 

November 2019 Debentures

 

An existing institutional investor has paid certain of our accounts payable in the amount of $26,235. We issued $26,235 in new debentures with substantially the same terms as our October Debenture. The debentures were issued in November 2019. The debentures originally matured November 20, 2020. The maturity date of the debentures was extended to June 30, 2021.

 

The debentures were fully converted to Common Stock during the three months ended March 31, 2021. 

 

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October 2019 Debentures

 

Effective September 30 2019, debenture holders waived certain events of default under debentures and notes issued in our debenture offerings and extended the maturity date of such debentures until March 31, 2020 in exchange for the issuance of $96,000 in new debentures with substantially the same terms as our October Debentures. The debentures were issued in October 2019. The debentures originally matured on October 1, 2020. The maturity date of the debentures was extended to June 30, 2021.

 

The debentures were fully converted to Common Stock during the three months ended March 31, 2021.

 

July 2019 Debentures

 

On July 16, 2019, we entered into securities purchase agreements with certain institutional investors. Pursuant to the securities purchase agreement, we issued an aggregate of $154,000 of senior convertible debentures (the “July 2019 Debentures”) in exchange for the extension of the maturity date of our December 2018 convertible notes and certain of our July 2018 and September 2017 convertible debentures, and the waiver of certain default provisions of our July 2018 and September 2017 convertible debentures. The maturity date of the debentures was extended to June 30, 2021.

 

The July 2019 Debentures were fully converted to Common Stock during the three months ended March 31, 2021.

 

December 2018 Notes

 

On December 13, 2018, we issued an aggregate of $25,000 in convertible promissory notes for cash proceeds of $25,000. The notes mature on the earlier of (i) June 30, 2019 or (ii) such time as we raise capital in exchange for the sale of securities and bear interest at 10% per year, payable on the maturity date. Pursuant to the terms of the notes, they may be converted into shares of Common Stock upon an event of default (as such term is defined in the notes) or upon the maturity date at the election of the holder at a price per share equal to 75% of the lowest trade price of our Common Stock on the trading day immediately prior to the date such exchange is exercised by the holder. The maturity date of the notes was extended to June 30, 2021.

 

The notes were fully converted to Common Stock during the three months ended March 31, 2021.

 

July 2018 Debentures

 

On July 3, 2018, we entered into securities purchase agreements with certain institutional investors. Pursuant to the securities purchase agreement, we sold an aggregate of $515,000 of senior convertible debentures (“July 2018 Debentures”) consisting of $500,000 in cash and the cancellation of $15,000 of obligations of the Company. Pursuant to the terms of the securities purchase agreement, we issued $515,000 in principal amount of July 2018 Debentures. The July 2018 Debentures have substantially the same terms as the October Debentures. The maturity date of the debentures was extended to June 30, 2021.

 

The July 2018 Debentures were fully converted to common stock during the three months ended March 31, 2021. 

 

September 2017 Debentures

 

On September 12, 2017, we entered into an exchange agreement with certain holders of our Series A 0% Convertible Preferred Stock (“Series A Shares”) and Series B 0% Convertible Preferred Stock (“Series B Shares”). Pursuant to the terms of the agreement, we issued to the investors approximately $2.5 million in principal amount of senior convertible debentures (the “September 2017 Debentures”) in exchange for 1,614.8125 Series A Shares with a stated value of approximately $1.6 million and 890 Series B Shares with a stated value of approximately $0.9 million. On September 12, 2017, we sold an aggregate of $320,000 of our September 2017 Debentures. The sale consisted of $250,000 in cash and the cancellation of $70,000 of obligations of the Company. The maturity date of the debentures was extended to December 31, 2021.

 

During the nine months ended September 30, 2021, $589,334 of debenture have been converted to common stock and $110,072 remains outstanding at September 30, 2021.

 

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NOTE 10 – SUBSEQUENT EVENTS

 

Adoption of Agreement and Plan of Merger and Consummation of Reorganization

 

On September 28, 2021 the Company implemented a holding company reorganization through an Agreement and Plan of Merger (the “Merger Agreement”), which became effective with the Financial Industry Regulatory Authority (“FINRA”) on October 11, 2021 at 5:00 p.m. Eastern Time (the “Effective Time”). The Merger Agreement was entered into by and among Inspyr Therapeutics, Inc., Rebus Holdings, Inc., and Rebus Sub, Inc., a wholly-owned subsidiary of Rebus Holdings which has resulted in Rebus becoming the direct parent company of Inspyr Therapeutics and replacing Inspyr Therapeutics as the public company trading on the OTC Markets (“OTC”) (the “Reorganization”). Further, the Company will begin trading under the symbol RBSH in twenty (20) trading days from October 12, 2021.

 

Pursuant to the Merger Agreement, Rebus Sub has merged with Inspyr Therapeutics pursuant to the filing of a certificate of merger with Inspyr Therapeutics surviving as a direct, wholly-owned subsidiary of Rebus Holdings (the “Merger”). At the Effective Time of the Merger:

 

 (i)Each outstanding share of Inspyr Therapeutics Common Stock, par value $0.0001 per share (“Inspyr Common Stock”), automatically converted into one share of Common Stock of Rebus Holdings, having the same designation, rights, powers, and preferences, and qualifications, limitations, and restrictions as a share of Inspyr Therapeutics Common Stock immediately prior to the Reorganization;

 

 (ii)Each outstanding share of Inspyr Series A Convertible Preferred Stock, par value $0.0001 per share (“Inspyr Series A Stock”), automatically converted into one share of Series A Convertible Preferred Stock par value $0.0001 per share, of Rebus Holdings (“Rebus Series A Stock”), having the same designation, rights, powers, and preferences, and qualifications, limitations, and restrictions as a share of Inspyr Series A Stock immediately prior to the Reorganization;

 

 (iii)Each outstanding share of Inspyr Series B Convertible Preferred Stock, par value $0.0001 per share (“Inspyr Series B Stock”), automatically converted into one share of Series B Convertible Preferred Stock par value $0.0001 per share, of Rebus Holdings (“Rebus Series B Stock”), having the same designation, rights, powers, and preferences, and qualifications, limitations, and restrictions as a share of Inspyr Series B Stock immediately prior to the Reorganization;

 

 (iv)Each outstanding share of Inspyr Series C Convertible Preferred Stock, par value $0.0001 per share (“Inspyr Series C Stock”), automatically converted into one share of Series C Convertible Preferred Stock par value $0.0001 per share, of Rebus Holdings (“Rebus Series C Stock”), having the same designation, rights, powers, and preferences, and qualifications, limitations, and restrictions as a share of Inspyr Series C Stock immediately prior to the Reorganization;

 

 (v)Each outstanding share of Inspyr Series D Convertible Preferred Stock, par value $0.0001 per share (“Inspyr Series D Stock”), automatically converted into one share of Series D Convertible Preferred Stock par value $0.0001 per share, of Rebus Holdings (“Rebus Series D Stock”), having the same designation, rights, powers, and preferences, and qualifications, limitations, and restrictions as a share of Inspyr Series D Stock immediately prior to the Reorganization;

 

 (vi)Each outstanding share of Inspyr Series E Convertible Preferred Stock, par value $0.0001 per share (“Inspyr Series E Stock”), automatically converted into one share of Series E Convertible Preferred Stock par value $0.0001 per share, of Rebus Holdings (“Rebus Series E Stock”), having the same designation, rights, powers, and preferences, and qualifications, limitations, and restrictions as a share of Inspyr Series E Stock immediately prior to the Reorganization; and

 

 (vii)Each outstanding share of Inspyr Series F Convertible Preferred Stock, par value $0.0001 per share (“Inspyr Series F Stock”), automatically converted into one share of Series F Convertible Preferred Stock par value $0.0001 per share, of Rebus Holdings (“Rebus Series F Stock”), having the same designation, rights, powers, and preferences, and qualifications, limitations, and restrictions as a share of Inspyr Series F Stock immediately prior to the Reorganization.

 

 16 

 

 

Accordingly, upon consummation of the Reorganization (and the Reverse Stock Split as defined below), Inspyr stockholders automatically became stockholders of Rebus Holdings, on a one-for-one basis, with the same number and approximate ownership percentage of shares of the same class as they held in Inspyr immediately prior to the Effective Time. The Reorganization is intended to be a tax-free transaction for U.S. federal income tax purposes for Inspyr stockholders.

 

The Reorganization has been conducted pursuant to Section 251(g) of the General Corporation Law of the State of Delaware, which provides for the formation of a holding company without a vote of the stockholders of the constituent corporation. The conversion of stock occurred automatically without an exchange of stock certificates. In addition, at the Effective Time:

 

 Each outstanding and unexpired option to purchase Inspyr Common Stock automatically converted into one share of Rebus Holdings Common Stock;

 

 Each outstanding warrant to purchase Inspyr Common Stock (“Inspyr Warrant”), whether or not vested, automatically converted into and become a warrant to purchase Rebus Holdings Common Stock (“Rebus Warrant”) and Rebus Holdings assumed each Inspyr Warrant in accordance with the terms of each Inspyr Warrant, and such Rebus Warrant has the same number of shares, the same exercise price (subject to adjustments), the same restrictions on exercise, and any other provisions contained in the Inspyr Warrants; and

 

 Each outstanding convertible debt instrument of Inspyr Therapeutics, including but not limited to, promissory notes or debentures that are convertible into Inspyr Common Stock (“Inspyr Convertible Notes”) automatically converted into, assumed, and became the convertible debt instruments of Rebus Holdings (“Rebus Convertible Notes”).

 

As a result of the Reorganization, Rebus Holdings became the successor issuer to Inspyr Therapeutics pursuant to Rule 12g-3(a) of the Exchange Act, and as a result, shares of Rebus Holdings Common Stock are deemed registered under Section 12(g) of the Exchange Act as the Common Stock of the successor issuer.

 

Reverse Stock Split

 

The 1-for-75 Reverse Stock Split became effective with the Secretary of State of Delaware as of 4:59 p.m. Eastern Time on October 5, 2021, and the Company began trading on a post Reverse Stock Split basis at the market open on October 12, 2021. As a result of the Reverse Stock Split, each of the holders of the Company’s Common Stock received one (1) new share of Common Stock for every seventy-five (75) shares such shareholder held immediately prior. The Reverse Stock Split also affected the Company’s outstanding stock options, warrants and other exercisable or convertible instruments and resulted in the shares underlying such instruments being reduced and the exercise price being increased proportionately to the Reverse Stock Split ratio. All share and per share data has been retroactively restated in the accompanying consolidated financial statements and footnotes for all periods presented to reflect the effects of the Reverse Stock Split. 

 

As a result, effective on October 12, 2021 (and just prior to the completion of the Reorganization), each of the holders of Inspyr Common Stock received one (1) new share of Inspyr Common Stock for every seventy-five (75) shares such shareholder held immediately prior to the Reverse Split Effective Time. The Reverse Stock Split also affected the Company’s outstanding stock options, warrants and other exercisable or convertible instruments and resulted in the shares underlying such instruments being reduced and the exercise price being increased proportionately to the Reverse Stock Split ratio. No fractional shares were issued as a result of the Reverse Stock Split. Any fractional shares that would have otherwise resulted from the Reverse Stock Split will be rounded up to the next whole number of shares.

 

As a result of the Reverse Stock Split, the number of issued and outstanding shares of Common Stock was adjusted from 772,902,289 shares to 10,309,212 shares. Additionally, pursuant to the terms of their Certificates of Designation, each Series of Inspyr preferred stock had the conversion price at which shares of such applicable preferred stock may be converted into shares of Inspyr Common Stock proportionately adjusted to reflect the Reverse Stock Split. Additionally, all outstanding options, warrants and convertible debt of Inspyr were adjusted proportionately pursuant to the Reverse Stock Split.

 

 17 

 

 

As a result of the Reorganization, each shareholder received such number of shares of Rebus Holdings Common Stock and Rebus Holdings Preferred Stock as the shareholder would have held of Inspyr immediately following the Reverse Stock Split.

 

Post Reverse Stock Split and Reorganization Information

 

The Company began trading on post Reverse Stock Split and Reorganization basis on the Pink Sheets of the OTC Markets Group on October 12, 2021 under the same symbol NSPX. In twenty (20) trading days from October 12, 2021, the Company will begin trading under the symbol RBSH ..

 

The officers and members of the Board of Inspyr became the officers and members of the board of directors of the Rebus Holdings.

 

Pursuant to the Reorganization, Rebus Holdings has, on a consolidated basis, the same assets, businesses, and operations as Inspyr Therapeutics had immediately prior to the Reorganization.

 

Issuance of Common Stock upon Conversion of Debentures

 

The Company issued 729,333 shares of Common Stock pursuant to the conversion of $87,520 of our outstanding debentures.

 

 18 

 

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements regarding our business development plans, pre-clinical and clinical studies, regulatory reviews, timing, strategies, expectations, anticipated expenses levels, business prospects and positioning with respect to market, demographic and pricing trends, business outlook, technology spending and various other matters (including contingent liabilities and obligations and changes in accounting policies, standards and interpretations) and express our current intentions, beliefs, expectations, strategies or predictions. These forward-looking statements are based on a number of assumptions and currently available information and are subject to a number of risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Special Note Regarding Forward-Looking Statements” and under “Risk Factors” and elsewhere in this quarterly report. The following discussion should be read in conjunction with Part I, Item 1 of this Quarterly Report as well as the financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 31, 2021.

  

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in addition to the accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:

 

Company overview – Discussion of our business plan and strategy in order to provide context for the reminder of the MD&A.

 

Critical Accounting Policies - Accounting policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

 

Results of Operations - Analysis of our financial results comparing the three and nine month periods ended September 30, 2021 to the comparable period of 2020.

 

Liquidity and Capital Resources - Liquidity discussion of our financial condition and potential sources of liquidity.

  

Company Overview

 

Business

 

Rebus Holdings, Inc. (fka Inspyr Therapeutics, Inc.) is a pharmaceutical company focused on the research and development of novel targeted precision therapeutics for the treatment of cancer. Our approach utilizes our proprietary delivery technology to better enhance immuno-modulation for improved therapeutic outcomes. Our potential first-in-class immune-oncology lead asset, RT-AR001, an adenosine A2B receptor antagonist, is differentiated by its intratumoral delivery of nano- or microparticle formulations that allows for better tumor infiltration. The adenosine A2 Receptor is one of many T-cell surface immune checkpoint proteins. Our patented portfolio of adenosine receptor antagonists provides flexibility to optimize treatment based on the specific adenosine targets found in each type of cancer.

 

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Adenosine Receptor Modulators

 

The adenosine receptor modulators include A2B and dual A2A/A2B antagonists that have broad development applicability including indications within immuno-oncology. Very high concentrations of adenosine are produced in the tumor microenvironment which prevents the host’s own immune cells from attacking the tumor. Adenosine receptor antagonists as single-agents and in combination with other existing immuno-oncology agents may overcome this immunosuppression, and boost the host immune response leading to enhanced anti-tumor activity as well as inhibition of metastasis. Preclinical data has shown effects with our drug candidates in animal models utilizing a novel platform delivery system. While we believe that the data from our nonclinical studies appear encouraging, the outcome of our ongoing or future studies may ultimately be unsuccessful.

   

Rebus Holdings / Ridgeway Licensing Agreement

 

Pursuant to our recent termination of license with Ridgeway Therapeutics, Inc., a Delaware Corporation, we reacquired the rights to certain intellectual property, discussed above, and are currently focusing on a pipeline of small molecule adenosine receptor modulators. In October 2020, pursuant to the cancellation of a license agreement whereby we previously licensed US Patent 9,593,118, we reacquired the exclusive right to such patent that covers both A2B and dual A2A/A2B antagonists. Accordingly, going forward our major focus will be to: (i) further characterization of the anti-cancer activity of our unique pipeline delivery platform containing A2B and dual A2A/A2B antagonists, leading to selection of a clinical candidate or candidates for an Investigative New Drug or IND enabling studies; and (ii) licensing and/or partnering our delivery platform and the A2B and dual A2A/A2B antagonists for further development.

 

During March 2020, we sold $250,000 of debt securities for cash, in October 2020, we sold $500,000 of debt securities for cash, in January 2021, we sold $500,000 of debt securities for cash and in June 2021 we sold $500,000 of debt securities for cash. We are currently using such funds to maintain our SEC reporting requirements, pay outstanding invoices to our independent registered accounting firm, legal fees, and to retain consultants and other personnel in preparation for an Investigational New Drug Application filing related to our unique delivery platform and portfolio of adenosine A2R antagonists for the treatment of certain solid tumors. Should we fail to further raise sufficient funds to execute our business plan, our priority would be to maintain our intellectual property portfolio and seek business development opportunities with potential development partners and/or acquirors.

 

Pre-Revenue

 

We are a pre-revenue, early-stage company that has not achieved profitability, and has no product revenues. Additionally, we have no approved products for sale.

   

 20 

 

 

Recent Developments

 

 Effective October 12, 2021, we (i) completed a 1-for-75 Reverse Stock Split and (ii) a holding company reorganization whereby we changed our name to Rebus Holdings, Inc.  
   
 On August 16, 2021, we appointed Raul Silvestre, Esq. as (i) our interim chief executive officer and principal accounting officer and (ii) as a member of the Board of Directors.  
   
 On June 18, 2021, we completed the private placement of $600,000 of non-interest bearing senior convertible debentures in exchange for $500,000 in cash and the cancellation of $100,000 in obligations.
   
 On January 12, 2021, we completed the private placement of $500,000 of non-interest bearing senior convertible debentures.

 

Financial

 

To date, we have devoted substantially all of our efforts and financial resources to the development of our proposed drug candidates. We have not received FDA approval to market, distribute or sell any products. We have recently begun working on developing IND approved studies for our adenosine receptor technology platform.

  

Since our inception in 2003, we have generated no revenue from product sales and have funded our operations principally through the private and public sales of our equity securities. We have never been profitable and as of September 30, 2021, we had an accumulated deficit of approximately $64.3 million. We expect to continue to incur significant operating losses for the foreseeable future as we continue the development of our product candidates and advance them through clinical trials.

 

Our cash balances at September 30, 2021 were approximately $995,000 representing 100% of total assets. In January 2021, we completed a private placement of $500,000 in cash of our debt securities and in June 2021 we completed an additional private placement of $500,000 in cash of our debt securities. Based on our current expected level of operating expenditures and current cash balance as of the date of this report, we expect to be able to fund our operations into the second quarter of 2022. This period could be shortened if there are any significant increases in spending that were not anticipated or other unforeseen events.

   

We anticipate raising additional cash through the private or public sales of equity or debt securities to continue to fund our operations and the development of our product candidates. There is no assurance that any such collaborative arrangement will be entered into or that financing will be available to us when needed in order to allow us to continue our operations, or if available, on terms acceptable to us. If we do not raise sufficient funds in a timely manner, we may be forced to curtail operations, delay or stop our ongoing pre-clinical studies and potential clinical trials, cease operations altogether, or file for bankruptcy. We currently do not have commitments for future funding from any source.

 

Going Concern

 

Our auditors’ report on our December 31, 2020 consolidated financial statements expressed an opinion that our capital resources as of the date of their Audit Report were not sufficient to sustain operations or complete our planned activities for the upcoming year unless we raised additional funds. Upon the cancellation of the Ridgeway license, we resumed preclinical development. Notwithstanding our recent financings in (i) January of 2021 whereby we raised $500,000 in cash and (ii) June 2021 whereby we raised $500,000 in cash, our current cash level raises substantial doubt about our ability to continue as a going concern. If we do not obtain additional funds, we may no longer be able to continue as a going concern and will cease operation which means that our shareholders will lose their entire investment

 

Critical Accounting Policies and Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make significant judgments and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management bases these significant judgments and estimates on historical experience and other assumptions it believes to be reasonable based upon information presently available. Actual results could differ from those estimates under different assumptions, judgments or conditions. There were no material changes to our critical accounting policies and use of estimates previously disclosed in our 2020 Annual Report on Form 10-K.

 

 21 

 

 

Recent Accounting Pronouncements

 

With the exception of those discussed below, there have not been any recent changes in accounting pronouncements and Accounting Standards Update (ASU) issued by the Financial Accounting Standards Board (FASB) during the nine months ended September 30, 2021 that are of significance or potential significance to the Company.

 

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

  

Result of Operations

 

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

 

Our results of operations have varied significantly from year to year and quarter to quarter and may vary significantly in the future. We did not have revenue during the three months ended September 30, 2021 and 2020, and we do not anticipate generating any revenues during 2021. Net income for the three months ending September 30, 2021 was approximately $6.1 million and net income for the three months ended September 30, 2020 was approximately $2.1 million, resulting from the operational activities described below.

 

Operating Expenses

 

Operating expense totaled approximately $0.2 million and $0.1 million during the three months ended September 30, 2021 and 2020, respectively. The increase in operating expenses is the result of the following factors.

 

  Three months ended
September 30
 Change in 2021 versus
2020
  2021 2020 $ %
  (amount in thousands)    
Operating Expenses                
Research and development $97  $11  $86   782%
General and administrative  118   126   (8)  6%
Total operating expenses $215  $137  $78   57%

  

Research and Development Expenses

 

Research and development expenses totaled approximately $0.1 million and $0.01 million for the three months ended September 30, 2021 and 2020, respectively.

 

Our current research and development expenses currently consist primarily of consulting fees and development expense related to development of the adenosine A2R antagonists and preparation for an IND filing.

 

 22 

 

 

General and Administrative

 

General and administrative expenses totaled approximately $0.1 million and $0.1 million for the three months ended September 30, 2021 and 2020, respectively. The decrease of approximately $0.01 million, or 6%, for the three months ended September 30, 2021 compared to the same period in 2020, was primarily due to decreased director compensation.

 

Our general and administrative expenses currently consist primarily of expenditures related to legal, accounting and tax, other professional services, and general operating expenses.

 

Other Income (Expense)

 

Other income (expense) totaled approximately $6.3 million of income and $2.2 million of income for the three months ended September 30, 2021 and 2020, respectively.

 

  Three Months Ended
September 30,
 Change in 2021 Versus
2020
  2021 2020 $ %
  (amount in thousands)    
Gain (loss) on change in fair value of derivative liability $6,660  $2,024  $4,636   229%
Gain (loss) on conversion of debt  (48)  240   (288)  120%
Interest (expense), net  (272)  (21)  (251)  1,195%
Total other (expense) $6,340  $2,243  $4,097   183%

 

Gain (loss) on change in fair value of derivative liability

 

As a result of a change in the fair value of our derivative liability, we realized gain of $6.7 million and $2.0 million during the three months ended September 30, 2021 and 2020, respectively. The change in the fair value of our derivative liability was the result of our convertible debentures and notes issued in September 2017, October 2020, January 2021 and June 2021, where we issued convertible notes with variable conversion rates, and to the issuance of our Series F preferred stock in October 2020, which is convertible into a variable number of shares of common stock. Refer to Note 6 in our unaudited condensed consolidated financial statements for further discussion on our derivative liability. 

 

Gain on conversion of debt

 

There was a loss on conversion of debentures of approximately $0.05 million during the three months ended September 30, 2021, with gain of approximately $0.2 million during the three months ended September 30, 2020. Gain on conversion of debt results from the difference between the fair value of common stock issued upon conversion and the carrying amount of the debt converted.

 

 23 

 

 

Interest income (expense)

 

We had net interest expense of $0.3 million in the three months ended September 30, 2021 compared to expense of $0.02 million for the three months ended September 30, 2020. The increase of $0.3 million was attributable an increase in the cost associated with derivative instruments issued with a value in excess of proceeds received. 

 

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

 

Our results of operations have varied significantly from year to year and quarter to quarter and may vary significantly in the future. We did not have revenue during the nine months ended September 30, 2021 and 2020, and we do not anticipate generating any revenues during 2021. Net income for the nine months ended September 30, 2021 was approximately $2.6 million and net income for the nine months ended September 30, 2020 was approximately $0.2 million, resulting from the operational activities described below.

 

Operating Expenses

 

Operating expense totaled approximately $0.6 million and $0.4 million during the nine months ended September 30, 2021 and 2020, respectively. The increase in operating expenses is the result of the following factors.

 

  Nine months ended
September 30
 Change in 2021 versus
2020
  2021 2020 $ %
  (amount in thousands)    
Operating Expenses                
Research and development $190  $33  $157   476%
General and administrative  371   344   27   8%
Total operating expenses $561  $377  $184   49%

  

Research and Development Expenses

 

Research and development expenses totaled approximately $0.2 million and $0.03 million for the nine months ended September 30, 2021 and 2020, respectively.

 

Our current research and development expenses currently consist primarily of consulting fees and development expense related to development of the adenosine A2R antagonists and preparation for an IND filing.

 

General and Administrative

 

General and administrative expenses totaled approximately $0.4 million and $0.3 million for the nine months ended September 30, 2021 and 2020, respectively. The increase of approximately $0.03 million, or 8%, for the nine months ended September 30, 2021 compared to the same period in 2020, was primarily due to increased professional fees partially offset by a reduction in director compensation.

 

Our general and administrative expenses currently consist primarily of expenditures related to legal, accounting and tax, other professional services, and general operating expenses.

 

Other Income (Expense)

 

Other income (expense) totaled approximately $3.2 million and $0.6 million of income for the nine months ended September 30, 2021 and 2020, respectively.

 

  Nine Months Ended
September 30,
  Change in 2021 Versus
2020
 
  2021  2020  $  % 
  (amount in thousands)       
Loss on change in fair value of derivative liability $3,001  $353  $2,648   750%
Gain on conversion of debt  1,130   398   732   184%
Interest (expense), net  (924)  (169)  (755)  447%
Total other (expense) $3,207  $582  $2,625   451%

 

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Gain (loss) on change in fair value of derivative liability

 

As a result of a change in the fair value of our derivative liability, we realized income of $3.0 million and $0.4 million during the nine months ended September 30, 2021 and 2020, respectively. The change in the fair value of our derivative liability was the result of our convertible debentures and notes issued in September 2017, July 2018, December 2018, July 2019, October 2019, November 2019, March 2020, October 2020, January 2021 and June 2021, where we issued convertible notes with variable conversion rates, and to the issuance of our Series F preferred stock in October 2020, which is convertible into a variable number of shares of common stock. Refer to Note 6 in our unaudited condensed consolidated financial statements for further discussion on our derivative liability. 

 

Gain on conversion of debt

 

There was a gain on conversion of debentures of approximately $1.1 million during the nine months ended September 30, 2021, compared to a gain of $0.4 million during the nine months ended September 30, 2020. Gain on conversion of debt results from the difference between the fair value of common stock issued upon conversion and the carrying amount of the debt converted.

 

Interest income (expense)

 

We had net interest expense of $0.9 million in the nine months ended September 30, 2021 compared to expense of $0.2 million for the nine months ended September 30, 2020. The increase of $0.8 million was attributable an increase in the cost associated with derivative instruments issued with a value in excess of proceeds received. 

  

Liquidity and Capital Resources

 

We have incurred losses since our inception in 2003 as a result of significant expenditures on operations, research and development and the lack of any approved products to generate revenue. We have an accumulated deficit of $64.3 million as of September 30, 2021 and anticipate that we will continue to incur additional losses for the foreseeable future. To date, we have funded our operations through the private sale of our equity securities, convertible debentures, and exercise of options and warrants, resulting in gross proceeds of approximately $39.1 million. Cash at September 30, 2021 was approximately $995,000.

 

Our auditors’ report on our December 31, 2020 financial statements expressed an opinion that our capital resources as of the date of their audit report were not sufficient to sustain operations or complete our planned activities for the upcoming year unless we raised additional funds. Based on our current level of expected operating expenditures, we expect to be able to fund our operations into second quarter of 2022. This assumes that we spend minimally on general operations and only continue conducting our ongoing pre-clinical studies, and that we do not encounter any unexpected events or other circumstances that could shorten this time period. If we do not obtain additional funds by such time, we may no longer be able to continue as a going concern and will cease operation which means that our shareholders will lose their entire investment.

 

We are actively seeking sources of financing to fund our continued operations and research and development programs. To raise additional capital, we may sell equity or debt securities, or enter into collaborative, strategic and/or licensing transactions. There can be no assurance that we will be able to complete any financing transaction in a timely manner or on acceptable terms or otherwise. If we are not able to raise additional cash, we may be forced to further delay, curtail, or cease development of our product candidates, or cease operations altogether.

 

 25 

 

 

  

Nine months ended

September 30,

  Change in 2021 versus
2020
 
  2021  2020  $  % 
  (amount in thousands)       
Cash at beginning of period $404  $23  $381   1,657%
Net cash used in operating activities  (409)  (245)  (164)  67%
Net cash provided by investing activities  -   -   -   -%
Net cash provided by financing activities  1,000   255   745   292%
Cash and restricted cash at end of period $995  $33  $962   2,915%

 

Cash totaled approximately $1.0 million and $0.03 million as of September 30, 2021 and 2020, respectively. The increase of approximately $1.0 million at September 30, 2021 compared to the same period in 2020 was primarily attributable to cash available from current and prior year private placements offset by an increase in cash used in operations.

 

Net Cash Used in Operating Activities

 

Net cash used in operating activities was approximately $0.4 million and $0.2 million for the nine months ended September 30, 2021 and 2020, respectively. Cash used for operations increased by approximately $0.2 million, or 67%, during the nine months ended September 30, 2021, compared to the same period in 2020. The increase in cash used was primarily attributable to an increase in our net loss (after adjusting for noncash items) of approximately $0.2 million.

 

Net Cash Provided by Investing Activities

 

There was no cash provided by or used in investing activities for the nine months ended September 30, 2021 and 2020.

 

Net Cash Provided by Financing Activities

 

There was $1,000,000 cash provided by financing activities for the nine months ended September 30, 2021, compared to $255,000 cash provided by financing activities for the nine months ended September 30, 2020. In 2021, we received proceeds of $1,000,000 from the sale of convertible debentures and in 2020 we received proceeds of $250,000 from the sale of convertible debentures and $5,000 from the sale of preferred stock.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are not required to provide the information required by this item as we are considered a smaller reporting company, as defined by Rule 229.10(f)(1).

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting

 

Our management, with the participation of our current interim principal executive officer and principal accounting officer (both positions are held by our Chief Executive Officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act of 1934, as amended (the Exchange Act)), as of September 30, 2021. Based on that evaluation, management has concluded that due to limited resources and lack of fulltime employees, our internal control over financial reporting was ineffective as of September 30, 2021 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles. To mitigate the current limited resources and lack of employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting professionals. As we grow, we expect to increase the number of employees, which would enable us to implement adequate segregation of duties within the internal control framework. 

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15f of the Exchange Act) that occurred during the three month period ending September 30, 2021 that has materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 

 

Limitations on Internal Controls

 

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

 26 

 

 

PART II

OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

We have described below a number of uncertainties and risks which, in addition to uncertainties and risks presented elsewhere in this Quarterly Report, may adversely affect our business, operating results and financial condition. The uncertainties and risks enumerated below as well as those presented elsewhere in this Quarterly Report should be considered carefully in evaluating us, our business and the value of our securities. The following important factors, among others, could cause our actual business, financial condition and future results to differ materially from those contained in forward-looking statements made in this Quarterly Report or presented elsewhere by management from time to time.

  

Risks Related to our Financial Position, Need to Raise Additional Capital and Series F Preferred Stock.

 

We will not be able to continue as a going concern if we do not obtain additional financing. 

 

Since our inception, we have funded our operations through the sale of our securities. Our cash balances at December 31, 2020 were approximately $404,000. Despite raising $1,000,000 in gross proceeds through the sale of convertible debentures consisting of (i) $500,000 in January 2021 and (ii) $500,000 (for cash) in June 2021, our ability to continue as a going concern is still wholly dependent upon obtaining sufficient capital to fund our operations. We have no committed sources of additional capital and our access to capital funding is always uncertain. Accordingly, despite our ability to secure capital in the past, we cannot assure you that we will be able to secure additional capital through financing transactions, including issuance of debt, or through other means such as the licensing of our technology or grants. In the event that we are not able to secure additional funding, we may be forced to curtail operations, delay or stop ongoing clinical trials, cease operations altogether or file for bankruptcy.

 

Our auditors have expressed substantial doubt about our ability to continue as a going concern.

 

Our auditors’ report on our December 31, 2020 consolidated financial statements expressed an opinion that our capital resources as of the date of their audit report were not sufficient to sustain operations or complete our planned activities for the upcoming year unless we raised additional funds. Our current cash level raises substantial doubt about our ability to continue as a going concern past the second quarter of 2022. If we do not obtain additional funds by such time, we may no longer be able to continue as a going concern and will cease operation which means that our shareholders will lose their entire investment.

 

If we do not raise sufficient capital, we may lose rights to certain intellectual property which is the basis of our lead product candidates.

 

In October 2020, pursuant to the cancellation of a license agreement, we reacquired the rights to US Patent 9,593,118, which covers both A2B and dual A2A/A2B antagonists. The intellectual property contained in US Patent 9,593,118 is the basis of our lead product candidates. As a condition to the cancelation of the license, we are required to raise an aggregate of $5 million prior to October of 2023. If we are unable to raise such capital, the license cancelation will be revoked and the license will again become effective. In such event, we will lose all rights to the technology which forms the basis of our lead product candidate which will have a material adverse effect on our business and prospects.

 

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Our shareholders will experience substantial dilution upon the conversion of our Series F Preferred Stock.

 

On October 5, 2020, we reacquired the rights to certain intellectual property that is the basis of our lead proposed product. In exchange for the cancelation of the prior license, which resulted in our reacquisition of such technology, we issued 8,000 shares of Series F Preferred Stock. The 8,000 shares of Series F Preferred Stock are convertible into an aggregate of 80% of our issued and outstanding Common Stock immediately prior to conversion. Upon conversion, our shareholders will experience substantial dilution.  

 

Risks Relating to Our Stage of Development and Business

 

If we are unable to successfully attract and retain a new management team and secure additional members and employees, our business could be harmed.

 

On June 16, 2021, Michael Cain, our interim chief executive officer and principal accounting officer resigned as an officer and as a member of the Board of Directors. On August 16, 2021, we appointed Raul Silvestre as interim chief executive officer and principal accounting officer. We will need to augment senior management as well as engage additional personnel to execute our business plan and grow our business. Our success depends largely on the development and execution of our business strategy by our management team. The recent transitions in our executive team may be disruptive to our business, and if we are unable to manage an orderly transition, our business may be adversely affected. Additionally, since our management team consists of only one individual, Mr. Silvestre, the loss of Mr. Silvestre would likely harm our ability to implement our business strategy and respond to the rapidly changing market conditions in which we operate. There may be a limited number of persons with the requisite skills to serve in these positions, and we cannot assure you that we would be able to identify or employ such qualified personnel on acceptable terms, if at all. Additionally, we cannot assure you that management will succeed in working together as a team. In the event that we are unsuccessful, our business and prospects could be harmed. 

 

If our management team is not effective or if we fail to attract, hire or retain qualified personnel, we may not be able to design, develop or commercialize our products successfully or manage our business.

 

On August 16, 2021, we appointed Raul Silvestre as interim chief executive and principal accounting officer. While we have been able to secure an interim chief executive officer, our anticipated growth and expansion may require the addition of new personnel and the development of additional expertise by existing management. There is intense competition for qualified personnel in such areas. Accordingly, there can be no assurances that we would be able to attract and retain the qualified personnel necessary for the successful development of our business.

 

We are an early-stage company, have no product revenues, are not profitable and may never be profitable.

 

From inception through September 30, 2021, we have raised approximately $39.1 million through the sale of our securities and exercise of outstanding warrants. During this same period, we have recorded an accumulated deficit of approximately $64.3 million. Our net losses for the two most recent fiscal years ended December 31, 2020 and 2019 were $6,295,000 and $934,000, respectively. Our increase in net losses is primarily the result of a loss from the change in fair value of our derivative instruments and the cost attributable to the termination of our license with Ridgeway Therapeutic, Inc., partially offset by an increase in gains from conversion of debt and a decrease in interest expense. None of our products in development have received approval from the United States Food and Drug Administration or FDA, or other regulatory authorities; we have no sales and have never generated revenues, nor do we expect to for the foreseeable future. We are currently focusing our efforts on the development of our adenosine receptor modulators. We expect to incur significant operating losses for the foreseeable future as we continue the research, pre-clinical and clinical development of our product candidates as well as the possible in-licensing of additional clinical and pre-clinical assets. Accordingly, we will need additional capital to fund our continuing operations and any expansion plans. Since we do not generate any revenue, the most likely sources of such additional capital include the sale of our securities, a strategic licensing collaboration transaction or joint venture involving the rights to one or more of our product candidates, or from grants. To the extent that we raise additional capital by issuing equity securities, our stockholders are likely to experience dilution with regard to their percentage ownership of the company, which may be significant. If we raise additional funds through collaborations or licensing arrangements, we may be required to relinquish some or all the rights to our technologies, product candidates, or grant licenses on terms that are not favorable to us. If we raise additional capital by incurring debt, we could incur significant interest expense and become subject to covenants that could affect the manner in which we conduct our business, including securing such debt obligations with our assets.

 

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Our product candidates are at various stages of early development and significant financial resources are required to develop commercially viable products and obtain regulatory approval to market and sell such products. We will need to devote significantly more research and development efforts, financial resources and personnel to develop commercially viable products and obtain regulatory approvals. We may encounter hurdles and unexpected issues as we proceed in the development of our other product candidates. While initial data from our research appear promising, the outcome of the pre-clinical and development work is uncertain and future trials may ultimately be unsuccessful. If we fail to develop and successfully commercialize our product candidates, our business may be materially harmed and could fail.

 

We have a limited operating history as a company and may not be able to effectively operate our business.

 

Our limited staff and operating history mean that there is a high degree of uncertainty regarding our ability to:

 

 develop and commercialize our technologies and proposed products;
   
 obtain regulatory approval to commence the marketing of our products;
   
 identify, hire and retain the needed personnel to implement our business plan;
   
 manage growth;
   
 achieve market acceptance or insurance reimbursement for any of our proposed products, if successfully developed; or
   
 respond to competition.

 

No assurances can be given as to exactly when, if at all, we will be able to fully develop, and take the necessary steps to derive any revenues from our proposed product candidates.

 

We rely on technologies that we may not be able to commercially develop, which will prevent us from generating revenues, operating profitably or providing investors any return on their investment. 

 

We have refocused our development on our adenosine receptor modulator technologies and our ability to generate revenue and operate profitably will depend on us being able to develop these technologies for human applications. We cannot guarantee that the results obtained in clinical evaluation of our therapies will be sufficient to warrant approval by the FDA for clinical use. Even if our therapies are approved for use by the FDA, there is no guarantee that they will exhibit an enhanced efficacy relative to competing products such that they will be adopted by the medical community. Without significant adoption by the medical community our product candidates will have limited commercial potential which will likely result in the loss of your entire investment.

 

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Inability to complete pre-clinical and clinical testing and trials will impair the viability of the Company. 

 

We are in the development stage and have not yet applied for approval by the FDA to conduct clinical trials. Even if we successfully file an IND application and receive clearance from the FDA to commence trials, the outcome of pre-clinical, clinical and product testing of our product candidates is uncertain, and if we are unable to satisfactorily complete such testing, or if such testing yields unsatisfactory results, we will be unable to commercially produce our proposed products. Before obtaining regulatory approvals for the commercial sale of any potential human products, our product candidates will be subjected to extensive pre-clinical and clinical testing to demonstrate their safety and efficacy in humans. No assurances can be given that the clinical trials of our product candidates, or those of licensees or collaborators, will demonstrate the safety and efficacy of such product candidates at all, or to the extent necessary to obtain appropriate regulatory approvals, or that the testing of such product candidates will be completed in a timely manner, if at all, or without significant increases in costs, program delays or both, all of which could harm our ability to generate revenues. In addition, our product candidates may not prove to be more effective for treating disease than current therapies. Accordingly, we may have to delay or abandon efforts to research, develop or obtain regulatory approval to market our product candidates. Many companies involved in biotechnology research and development have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. The failure to adequately demonstrate the safety and efficacy of a therapeutic product under development could delay or prevent regulatory approval of the product and could harm our ability to generate revenues, operate profitably or produce any return on an investment in our company.

  

Raising capital may be difficult as a result of our history of losses and limited operating history in our current stage of development.

 

When making investment decisions, investors typically look at a company’s management, earnings and historical performance in evaluating the risks and operations of the business and the business’s future prospects. Our history of losses, new management team and relatively limited operating history in our current stage of development makes such evaluation, as well as any estimation of our future performance, substantially more difficult. As a result, investors may be unwilling to invest in us or on terms or conditions which are acceptable. If we are unable to secure additional financing, we may need to materially scale back our business plan and/or operations or cease operations altogether. 

 

A pandemic, epidemic or outbreak of an infectious disease in the markets in which we operate or that otherwise impacts our facilities or advisors could adversely impact our business.

 

If a pandemic, epidemic, or outbreak of an infectious disease including the recent outbreak of respiratory illness caused by a novel coronavirus (COVID-19) or other public health crisis were to affect our facilities or those of our suppliers, our business could be adversely affected. A pandemic typically results in social distancing, travel bans and quarantine, and this may limit access to our facilities, management, support staff and professional advisors. These factors, in turn, may not only materially impact our operations and financial condition, but our overall ability to react timely to mitigate the impact of this event. Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission.

 

Business or economic disruptions or global health concerns could seriously harm our development efforts and increase our costs and expenses.

 

Broad-based business or economic disruptions could adversely affect our ongoing or planned research and development activities. For example, in November 2019 an outbreak of a novel strain of coronavirus originated in Wuhan, China, and has since spread around the world, including to the United States. To date, this outbreak has already resulted in extended shutdowns of many businesses around the world, including in the United States. Global health concerns, such as coronavirus, could also result in social, economic, and labor instability in the countries in which we or the third parties with whom we engage operate. We cannot presently predict the scope, severity and longevity of any potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage or plan to engage, including the suppliers, clinical trial sites, regulators and other third parties with whom we conduct business or plan to conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted. It is also possible that global health concerns such as this one could disproportionately impact the hospitals and clinical sites in which we conduct or plan to conduct any of our clinical trials, which could have a material adverse effect on our business and our results of operation and financial condition. 

 

Risks Related to Commercialization

 

The market for our proposed products is rapidly changing and competitive.

 

The pharmaceutical and biotechnology industries are subject to rapid and substantial technological change and innovation. Developments by others may render our proposed products noncompetitive or obsolete, or we may be unable to keep pace with technological developments and other market factors. Competition from pharmaceutical and biotechnology companies, universities, governmental entities and others diversifying into the field is intense and is expected to increase.

 

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As a pre-revenue company, our resources are limited, and we may experience challenges inherent in the early development of novel therapeutics. Competitors have developed or are in the process of developing technologies that are, or in the future may be, the basis for competition. Some of these technologies may have an entirely different approach or means of accomplishing similar therapeutic efforts compared to our proposed products. Our competitors may develop therapies that are safer, more effective and less costly than our proposed products and therefore, present a serious competitive threat to us.

 

The acceptance of therapies that are alternatives to ours may limit market acceptance of our proposed products, even if commercialized. Many of our targeted diseases and conditions can also be treated by other medications and treatments. These treatments may be widely accepted in medical communities and have a longer history of use. The established use of other competing therapies may limit the potential for our proposed products, even if commercialized.

 

Our proposed products may not be accepted by the healthcare community.

 

Our proposed products, if approved for marketing, may not achieve market acceptance by the healthcare community since hospitals, physicians, patients, or the medical community in general may decide not to utilize them. We are attempting to develop products that are likely to be first approved for marketing as a treatment for late-stage cancer where there is no truly effective standard of care. If approved for use in late-stage cancer, our proposed products might then be evaluated in earlier stages where they could represent a substantial departure from established treatment methods and would most likely compete with a number of more conventional drugs and therapies which are manufactured and marketed by major pharmaceutical companies. It is too early in the development cycle of our proposed products for us to predict our major competitors. The degree of market acceptance of our products, if developed, will depend on a number of factors, including but not limited to:

 

 our ability to demonstrate the clinical efficacy and safety of our proposed products to the medical community;

  

 our ability to create products that are superior to alternative products;
   
 our ability to establish in the medical community the potential advantage of our treatments over alternative treatment methods; and
   
 the reimbursement policies of government and third-party payors.

 

If the healthcare community does not accept our products, our business could be materially harmed.

 

Our potential competitors in the biotechnology and pharmaceutical industries have significantly greater resources than we have.

 

We compete against numerous companies, many of which have substantially greater resources than we have. Several such competitors have research programs and/or efforts to treat the same diseases we target. Companies that may compete with us have substantially greater financial, research, manufacturing and marketing resources than we do. As a result, such competitors may find it easier to compete in our industry and bring competing products to market.

 

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Risks Related to the Development and Manufacturing of Our Product Candidates

 

We intend to rely exclusively upon third-party FDA-regulated manufacturers and suppliers for our proposed products.

 

We currently have no internal manufacturing capability and intend to rely exclusively on FDA-approved licensees, strategic partners or third-party contract manufacturers or suppliers for the foreseeable future. Because manufacturing facilities are subject to regulatory oversight and inspection, the failure of any of our third-party FDA regulated manufactures or suppliers to comply with regulatory requirements could result in material manufacturing delays and product shortages, which could delay or otherwise negatively impact our clinical trials and product development plans. Should we be forced to manufacture our proposed products, we cannot give any assurance that we would be able to develop internal manufacturing capabilities or secure third-party suppliers for raw materials. In the event that we seek third party suppliers or alternative manufacturers, they may require us to purchase a minimum amount of materials or could require other unfavorable terms. Any such event could materially impact our business prospects and could delay the development of our proposed products. Moreover, we cannot give any assurance that the contract manufacturers or suppliers that we select will be able to supply our products in a timely or cost-effective manner or in accordance with applicable regulatory requirements or our own specifications.

  

We may not be able to establish or maintain the third-party relationships that are necessary to develop or potentially commercialize our product candidates.

 

As needed, we plan to rely heavily on third party collaborators, partners, licensees, clinical research organizations, clinical investigators, vendors or other third parties to support our research and development efforts and to conduct clinical trials for our product candidates. We cannot guarantee that we will be able to successfully negotiate agreements for, or maintain relationships with, these third parties on a commercially reasonable basis, if at all. Additionally, to commercialize our proposed products, we intend to rely on third party licensees or the outright sale of our proposed products to pharmaceutical partner(s). If we fail to establish or maintain such third-party relationships as anticipated, our business could be adversely affected.

 

We are dependent upon third parties to develop our product candidates, and such parties are, to some extent, outside of our control.

 

We depend and plan to depend upon independent contract research organizations, investigators, and collaborators, such as universities and medical institutions, to conduct our pre-clinical and clinical studies. These individuals and/or entities are not our employees and we cannot control the amount or timing of resources that they devote to our programs. These third parties may not assign as great a priority to our programs or pursue them as diligently as we would if we were undertaking such programs ourselves. If these third parties fail to devote sufficient time and resources to our programs, or if their performance is substandard, the development of our drug candidates and corresponding FDA approval could be delayed or fail entirely.

 

Our therapeutic compounds may not be able to be manufactured profitably on a large enough scale to support commercialization.

 

To date, our therapeutic compounds have only been manufactured at a scale which is adequate to supply our research and pre-clinical activities. There can be no assurance that the procedures currently used to manufacture our therapeutic compounds will work at a scale which is adequate for commercial needs. In the event our therapeutic compounds cannot be manufactured in sufficient quantities for commercialization, our future prospects could be significantly impacted, and our financial prospects would be materially harmed.

 

Risks Relating to our Intellectual Property

 

Our competitive position is dependent on our intellectual property and we may not be able to withstand challenges to our intellectual property rights.

 

We rely on our intellectual property, including our issued and applied for U.S. and foreign patents as the foundation of our business. If our intellectual property rights are challenged, no assurances can be given that our patents or licenses would survive claims alleging invalidity or infringement on other patents and/or licenses. In addition, disputes may arise regarding inventorship of our intellectual property. It is possible that our intellectual property may be infringing upon existing patents that we are not currently unaware of. As the number of participants in the marketplace grows, the possibility of patent infringement claims against us increases. It is difficult, if not impossible, to determine how such disputes would be resolved. Furthermore, because of the substantial amount of discovery required in connection with patent litigation, there is a risk that some of our confidential information could be required to be publicly disclosed. Any litigation claims against us may cause us to incur substantial costs and could place a significant strain upon our financial resources, divert the attention of management or restrict our core business or result in the public disclosure of confidential information.

 

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We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be unable to protect our rights to, or use of, our technology.

 

Some or all of our patent applications may not issue as patents, or the claims of any issued patents may not afford meaningful protection for our technologies or products. In addition, patents issued to us or our licensors, if any, may be challenged and subsequently narrowed, invalidated or circumvented. Patent litigation is widespread in the biotechnology industry and could harm our business. Litigation might be necessary to protect our patent position or to determine the scope and validity of third-party proprietary rights. If we choose to go to court to stop someone else from using the inventions claimed in our patents, that individual or company would have the right to ask the court to rule that such patents are invalid and/or should not be enforced against that third party. These lawsuits are expensive, and we may not have the required resources to pursue such litigation or to protect our patent rights. In addition, there is a risk that the court might decide that these patents are not valid and that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of these patents is upheld, the court could refuse to stop the other party on the ground that such other party’s activities do not infringe on our rights contained in these patents. 

 

Furthermore, a third party may claim that we are using inventions covered by their patent rights and may go to court to stop us from engaging in our normal operations and activities, including making or selling our product candidates. These lawsuits are costly and could materially increase our operating expenses and divert the attention of managerial and technical personnel. There is a risk that a court would decide that we are infringing the third party’s patents and would order us to stop the activities covered by the patents. In addition, there is a risk that a court would order us to pay the other party damages for having violated the other party’s patents. The biotechnology industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. 

 

Because some patent applications in the United States may be maintained in secrecy until the patents are issued, patent applications in the United States and many foreign jurisdictions are typically not published until eighteen months after filing, and publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our issued patents or our pending applications or that we were the first to invent the technology. Our competitors may have filed, and may in the future file, patent applications covering technology similar to ours. Any such patent application may have priority over our patent applications and could further require us to obtain rights to issued patents covering such technologies.

 

If another party has filed a United States patent application on inventions similar to ours, we may have to participate in an interference or other proceeding in the U.S. Patent and Trademark Office, or the PTO, or a court to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our United States patent position with respect to such inventions.

 

Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the capital necessary to continue our operations.

 

Obtaining and maintaining our patent protection depends upon compliance with various procedural, documentary, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

 

The PTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.

 

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We may not be able to adequately protect our intellectual property.

 

We rely in part on trade secret protection in order to protect our proprietary trade secrets and unpatented know-how. However, trade secrets are difficult to protect, and we cannot be certain that others do not develop the same or similar technologies on their own. Additionally, research with regard to our technologies has been performed in countries outside of the United States, and we also anticipate conducting joint ventures, collaborations and future clinical trials outside the US. The laws in some of these countries may not provide protection for our trade secrets and intellectual property. We have taken steps, including entering into confidentiality agreements with our employees, consultants, service providers, and potential strategic partners to protect our trade secrets and unpatented know-how. These agreements generally require that the other party keep confidential and not disclose to third parties all confidential information developed by the party or made known to the party by us during the course of the party’s relationship with us. We also typically obtain agreements from these parties which provide that inventions conceived by the party in the course of rendering services to us are our property. However, these agreements may not be honored, including in foreign countries in which we conduct research, and may not effectively assign intellectual property rights to us. Enforcing a claim that a party illegally obtained and is using our trade secrets or know-how is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets or know-how. The failure to obtain or maintain trade secret protection could adversely affect our competitive position.

 

We may be subject to claims that our employees or consultants have wrongfully used or disclosed alleged trade secrets of their former employers.

 

As is common in the biotechnology and pharmaceutical industries, we may employ and hire individuals and/or entities who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these individuals, entities or that we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

 

Risks Relating to Marketing Approval and Government Regulations 

 

Data obtained from clinical trials are susceptible to varying interpretations and may not be sufficient to support approval of our proposed products by the FDA.

 

The design of our potential clinical trials will be based on many assumptions about the expected effect of our product candidates and if those assumptions are incorrect, our potential clinical trials may not produce statistically significant results. Preliminary results may not be confirmed on full analysis of the detailed results of early clinical trials. Data already obtained, or in the future obtained, from pre-clinical studies and clinical trials do not necessarily predict the results that may be obtained from later trials. Moreover, pre-clinical and clinical data are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. The failure to adequately demonstrate the safety and effectiveness of a proposed formulation or product under development could delay or prevent regulatory clearance of the potential drug. Our products may not prove to be safe and effective in clinical trials and may not meet all regulatory requirements needed to receive regulatory approval. While data from our completed trials appear promising, the outcome of the current trials is uncertain, and these trials or future trials may ultimately be unsuccessful. Our clinical trials may among other things, not demonstrate sufficient levels of safety and efficacy necessary to obtain the requisite regulatory approvals for our drugs, and thus our proposed drugs may not be approved for marketing.

 

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Our proposed products may not receive FDA or other regulatory approvals.

 

The FDA and comparable government agencies in foreign countries impose substantial regulations on the manufacture and marketing of pharmaceutical products through expensive, lengthy and detailed laboratory, pre-clinical and clinical testing procedures, sampling activities and other costly and time-consuming procedures. Satisfaction of these regulations typically takes several years or more and varies substantially based upon the type, complexity and novelty of the proposed product. Our proposed products are subject to extensive regulation and/or acceptance by numerous governmental authorities in the United States, including the FDA, and authorities in other countries. Most of our proposed products will require governmental approval before they can be commercialized. Our failure to receive the regulatory approvals in the United States or foreign countries will materially impact our business.

 

Our proposed products may not have favorable results in clinical trials or receive regulatory approval.

 

Encouraging pre-clinical data associated with our proposed products should not be relied upon as evidence that our planned pre-clinical and clinical trials will ultimately be successful, or our products approved for marketing. Prior to gaining regulatory approval for commercial sales our proposed products, we will be required to demonstrate through clinical trials that our product candidates are safe and effective for use in a diverse population. There is typically an extremely high rate of attrition from the failure of product candidates as they proceed through clinical trials. If any product candidate fails to demonstrate sufficient safety and efficacy in any clinical trial, then we could experience potentially significant delays in, or be required to abandon, development of that product candidate.

 

If users of our proposed products are unable to obtain adequate reimbursement from third-party payors, market acceptance of our proposed products may be limited, and we may not achieve revenues or profits.

 

The continuing efforts of governments, insurance companies, health maintenance organizations and other payers of healthcare costs to contain or reduce costs of health care may affect our future revenues and profitability as well as the future revenues and profitability of our potential customers, suppliers and collaborative partners in addition to the availability of capital. In other words, our ability to commercialize our proposed products depends in large part on the extent to which appropriate reimbursement levels for the cost of our proposed formulations, products and related treatments are obtained by the health care providers of these products and treatments. At this time, we cannot predict the precise impact that recently adopted or future laws will have on these reimbursement levels.

 

We may be unable to comply with our reporting and other requirements under federal securities laws.

 

The Sarbanes-Oxley Act of 2002, as well as related new rules and regulations implemented by the United States Securities and Exchange Commission, or SEC, and the Public Company Accounting Oversight Board, require changes in the corporate governance practices and financial reporting standards for public companies. These laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002 relating to internal control over financial reporting, would be expected to materially increase the Company’s legal and financial compliance costs and make some activities more time-consuming and more burdensome. Presently we qualify as a non-accelerated filer. Accordingly, we are exempt from the requirements of Section 404(b) and our independent registered public accounting firm is not required to audit the design and operating effectiveness of our internal controls and management’s assessment of the design and the operating effectiveness of such internal controls. In the event that we become an accelerated filer, we will be required to expend substantial capital in connection with compliance.

 

We do not have effective internal controls over our financial reporting.

 

Because of our limited resources, management has concluded that our internal control over financial reporting may not be effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Effective internal controls over financial reporting and disclosure controls and procedures are necessary for us to provide reliable financial and other reports and effectively prevent fraud. If we cannot provide reliable financial or SEC reports or prevent fraud, investors may lose confidence in our SEC reports, our operating results and the trading price of our common stock could suffer materially, and we may become subject to litigation.

 

Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses and will divert time and attention away from revenue generating activities.

 

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. Our prior management team invests significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from developing our business to compliance activities which could have an adverse effect on our business.

 

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Risks Relating to our Securities

 

Our common stock price may be particularly volatile because of our stage of development and business.

 

The market prices for the securities of biotechnology and pharmaceutical companies in general, and early-stage drug development companies in particular, such as ours, have been highly volatile and may continue to be highly volatile in the future. The following may have a significant impact on the market price of our common stock:

 

 our ability to retain and augment our current management team and workforce, which currently consists of only one employee, our chief executive officer;

 

 the development status of our drug candidates, particularly the results of our clinical trials;

 

 market conditions or trends related to the biotechnology and pharmaceutical industries, or the market in general;

 

 announcements of technological innovations, new commercial products, or other material events by our competitors or us;

 

 disputes or other developments concerning our proprietary rights;

 

 changes in, or failure to meet, securities analysts’ or investors’ expectations of our financial and developmental performance;

 

 additions or departures of key personnel;

 

 loss of any strategic relationship;

 

 discussions of our business, products, financial performance, prospects, or stock price by the financial and scientific press and online investor communities such as chat rooms;

 

 industry developments, including, without limitation, changes in healthcare policies or practices or third-party reimbursement policies;

 

 public concern as to, and legislative action with respect to, testing or other research areas of biopharmaceutical and pharmaceutical companies, the pricing and availability of prescription drugs, or the safety of drugs;

 

 regulatory developments in the United States or foreign countries; and

 

 economic, political and other external factors.

 

Broad market fluctuations may cause the market price of our common stock to decline substantially. Additionally, fluctuations in the trading price or liquidity of our common stock may materially and adversely affect, among other things, the interest of investors to purchase our common stock on the open market and, generally, our ability to raise capital.

 

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Our board of directors has broad discretion to issue additional securities, in the event that we have adequate authorized capital to issue such securities.

  

We are authorized under our certificate of incorporation to issue up to 1,000,000,000 shares of common stock and 30,000,000 “blank check” shares of preferred stock. Shares of our blank check preferred stock provide the board of directors with broad authority to determine voting, dividend, conversion, and other rights. As of October 31, 2021, we have issued and outstanding 10,309,212 shares of common stock. We have also issued 1,853 shares of Series A 0% Convertible Preferred Stock, of which 133.8125 are outstanding, 1,000 shares of Series B 0% Convertible Preferred Stock, of which 71 are outstanding, 290.43148 shares of Series C 0% Convertible Preferred Stock, that are all outstanding, 5,000 shares of Series D 0% Convertible Preferred Stock, all of which are outstanding, 5,000 shares of Series E 0% Convertible Preferred Stock, all of which are outstanding, and 8,000 shares of Series F 0% Convertible Preferred Stock, all of which are outstanding. Accordingly, we are entitled to issue 989,690,788 shares of common stock, and 29,981,505 additional shares of “blank check” preferred stock. Our board may generally issue those common and preferred shares, or convertible securities to purchase those shares, without further approval by our shareholders. Any additional preferred shares we may issue could have such rights, preferences, privileges, and restrictions as may be designated from time-to-time by our board, including preferential dividend rights, voting rights, conversion rights, redemption rights and liquidation provisions.

   

It is likely that we will issue a large amount of additional securities to raise capital in order to further our business plans. It is also likely that we will issue a large amount of additional securities to directors, officers, employees and consultants as compensatory grants in connection with their services, both in the form of stand-alone grants or under our various stock plans. Any issuances could be made at a price that reflects a discount to, or a premium from, the then-current market price of our common stock. These issuances would dilute the percentage ownership interest of our current shareholders, which would have the effect of reducing your influence on matters on which our stockholders vote, and might dilute the net tangible book value per share of our common stock.

  

Future sales of our common stock could cause our stock price to fall.

 

Transactions that result in a large amount of newly issued shares become readily tradable, or other events that cause current stockholders to sell shares, could place downward pressure on the trading price of our common stock. In addition, the lack of a robust trading market may require a stockholder who desires to sell a large number of shares of common stock to sell the shares in increments over time to mitigate any adverse impact of the sales on the market price of our stock. If our stockholders sell, or the market perceives that our stockholders intend to sell for various reasons, substantial amounts of our common stock in the public market, including shares issued upon the exercise of outstanding options or warrants, the market price of our common stock could fall. Sales of a substantial number of shares of our common stock may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. We may become involved in securities class action litigation that could divert management’s attention and harm our business.

 

As of October 31, 2021, we had 1,000,000,000 shares of common stock authorized and 10,309,212 shares outstanding, 1,853 shares of Series A 0% Convertible Preferred Stock issued and 133.8125 Series A 0% Convertible Preferred Stock outstanding, 1,000 shares of Series B 0% Convertible Preferred Stock issued and 71 Series B 0% Convertible Preferred Stock outstanding, 290.43148 shares of Series C 0% Convertible Preferred Stock issued and outstanding, 5,000 shares of Series D 0% Convertible Preferred Stock issued and outstanding, 5,000 shares of Series E 0% Convertible Preferred Stock issued and outstanding, and 8,000 shares of Series F 0% Convertible Preferred Stock issued and outstanding. We additionally have issued an aggregate of $5,591,048 of senior convertible debentures and convertible notes that are convertible into common stock at any time, of which $810,072 is outstanding. Substantially all of the common shares and common shares underlying the Series A 0% Convertible Preferred, Series B 0% Convertible Preferred, Series C 0% Convertible Preferred, Series D 0% Convertible Preferred, Series E 0% convertible Preferred, and Series F 0% Convertible Preferred are available for public sale, subject in some cases to volume and other limitations or delivery of a prospectus. As of October 31, 2021, we were obligated to reserve for issuance (i) 5 shares of our common stock issuable upon the conversion of 133.8125 shares of Series A 0% Convertible Preferred Stock including an additional number of common shares we are contractually obligated to reserve pursuant to our December 2015 offering; (ii) 189,334 shares of our common stock issuable upon the conversion of 71 shares of Series B 0% Convertible Preferred Stock including an additional number of common shares we are contractually obligated to reserve pursuant to our December 2016 offering; (iii) 678 shares of our common stock issuable upon the conversion of 290.43148 shares of Series C 0% Convertible Preferred Stock including an additional number of common shares we are contractually obligated to reserve pursuant to our March 2017 offering, (iv) 18 shares of common stock issuable upon the conversion of 5,000 shares of Series D 0% Convertible Preferred Stock, (v) 222 shares of common stock issuable upon the conversion of 5,000 shares of Series E 0% Convertible Preferred Stock, (vi) an indeterminate number of shares of common stock issuable upon the conversion of 8,000 shares of Series F 0% Convertible Preferred Stock (such amount will equal 80% of the common stock post conversion), (vii) 102 shares of our common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $5,032.78 per share, including an additional number of common shares we are contractually obligated to reserve pursuant to our December 2015 offering, December 2016 offering and March 2017 offering, (viii) 9,202,880 shares of our common stock issuable upon conversion of our outstanding convertible notes/debentures. Subject to applicable vesting requirements and holding periods, upon conversion or exercise of the outstanding convertible notes and warrants, the underlying shares may be resold into the public market. We cannot predict if future issuances or sales of our common stock, or the availability of our common stock for sale, would harm the market price of our common stock or our ability to raise capital.

 

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The market for our common stock has historically been illiquid and our investors may be unable to sell their shares.

 

Our common stock has historically traded with limited volume on the pink sheets of the OTC Markets Group. Accordingly, although there has been an increased public market for our common stock, it is still relatively illiquid compared to that of a seasoned issuer. Prior to making an investment in our securities, you should consider the historically limited market for our common stock. No assurances can be given that the trading volume of our common stock will increase or remain the same.

 

We have not paid cash dividends in the past and do not expect to pay cash dividends in the foreseeable future.

 

We have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if the market price of our common stock appreciates.

 

Provisions of Delaware law and executive employment agreements may prevent or delay a change of control, which could depress the trading price of our common stock.

 

We are subject to the Delaware anti-takeover laws regulating corporate takeovers. These anti-takeover laws prevent Delaware corporations from engaging in a merger or sale of more than 10% of its assets with any stockholder, including all affiliates and associates of the stockholder, who owns 15% or more of the corporation’s outstanding voting stock, for three years following the date that the stockholder acquired 15% or more of the corporation’s assets unless:

 

 the Board of Directors approved the transaction in which the stockholder acquired 15% or more of the corporation’s assets;

 

 after the transaction in which the stockholder acquired 15% or more of the corporation’s assets, the stockholder owned at least 85% of the corporation’s outstanding voting stock, excluding shares owned by directors, officers and employee stock plans in which employee participants do not have the right to determine confidentially whether shares held under the plan will be tendered in a tender or exchange offer; or

 

 on or after this date, the merger or sale is approved by the Board of Directors and the holders of at least two-thirds of the outstanding voting stock that is not owned by the stockholder.

 

A Delaware corporation may opt out of the Delaware anti-takeover laws if its certificate of incorporation or bylaws so provides. We have not opted out of the provisions of the anti-takeover laws. As such, these laws could prohibit or delay mergers or other takeover or change of control transactions and may discourage attempts by other companies to acquire us.

 

In addition, employment agreements with certain executive officers provide for the payment of severance and accelerated vesting of options and restricted stock in the event of termination following a change of control. These provisions could have the effect of discouraging potential takeover attempts even if it would be beneficial to shareholders.

 

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Our certificate of incorporation and bylaws contain provisions that could discourage a third-party from acquiring us.

 

Our certificate of incorporation and bylaws, as applicable, among other things (i) provide our board with the ability to alter the bylaws without stockholder approval and (ii) provide that vacancies on our board of directors may be filled by a majority of directors in office. These provisions, while designed to reduce vulnerability to an unsolicited acquisition proposal, and to discourage certain tactics used in proxy fights, may negatively impact a third-party’s decision to acquire us even if it would be beneficial to shareholders.

  

If securities or industry analysts do not publish research or reports or if they publish unfavorable research or reports, an active market for our common stock may not develop and the price of our common stock could decline.

 

We are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume. Even if we come to the attention of such persons, they may be reluctant to follow or recommend an unproven company such as ours until such time as we became more seasoned and viable. Generally, the trading market for a company’s securities depends in part on the research and reports that securities or industry analysts publish. We currently have limited research coverage by securities and industry analysts. As a consequence, there may be periods of time when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer with significant research coverage. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or if developed, will be sustained, or that current trading levels could be sustained or not diminish. In addition, in the event any analysts downgrades our securities, the price of our shares would likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the price of our common stock and its trading volume, if any, to decline. 

 

Our common stock is considered a “penny stock,” and is subject to additional sale and trading regulations that may make it more difficult to sell.

 

Our common stock is considered a “penny stock.” The principal result or effect of being designated a penny stock is that securities broker-dealers participating in sales of our common stock are subject to the penny stock regulations set forth in Rules 15g-2 through 15g-9 promulgated under the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investor’s account. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

 

The number of brokerage firms depositing and transacting trades for penny stock companies is very limited.

 

Currently, our Common Stock is traded on the OTC Markets Pink Tier. Many traditional brokerage firms and on-line brokerages refuse to accept for deposit and trade any penny stocks generally. For those that do, the time, effort and costs associated with depositing common stock in companies such as ours which has recently had sub-penny bid and ask are onerous, time consuming and costly. This may present material concerns and obstacles to those persons beneficially owning our common stock in certificate or book entry form, and wish to deposit same into a brokerage account.

 

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Recent Sale of Unregistered Securities

 

The following information is given with regard to unregistered securities sold since January 1, 2021 and including through the date of filing this Periodic Report. The unregistered securities were issued pursuant to Section 4(2) of the Securities Act:

 

 Between January 1, 2021 and March 15, 2021, debenture holders converted an aggregate of $1,964,500 into 4,248,864 shares of common stock at per share conversion prices ranging from $0.3375 to $0.5475.

 

 On January 12, 2021 we issued an aggregate of $500,000 in senior convertible debentures (“January 2021 Debentures”) to certain accredited investors for cash. The January 2021 Debentures mature on January 12, 2022. The conversion price of the January 2021 Debentures is equal to the lesser of (i) $24.75 and (ii) 85% of the lowest volume-weighted average price during the five trading days immediately prior to the date of conversion. As of the date of this report, all of January 2021 Debentures have been converted into common stock of the Company.

 

 

Between March 16, 2021 and June 30, 2021, debenture holders converted an aggregate of $191,068 into 378,167 shares of common stock at per share conversion prices ranging from $0.3975 to $0.7275.

   
 On June 18, 2021, we issued an aggregate of $600,000 in senior convertible debentures (“June 2021 Debentures”) to certain accredited investors for $500,000 cash and $100,000 in cancellation of obligations. The June 2021 Debentures have the same terms as the January 2021 Debentures and mature on June 18, 2022.

 

 Between July 1, 2021 and August 2, 2021, debenture holders converted an aggregate of $58,000 into 133,333 shares of common stock at per share conversion prices ranging from $0.315 to $0.3375.
   
 Between August 3, 2021 and September 30, 2021, debenture holders converted an aggregate of $354,480 into 2,340,667 shares of common stock at per share conversion prices ranging from $0.12 to $0.37.

  

Between October 1, 2021 and October 31, 2021, debenture holders converted an aggregate of $87,520 into 729,333 shares of common stock at a per share conversion price of $0.12.

 

ITEM 3. DEFAULT UPON SENIOR SECURITIES

  

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

On November 11, 2021, the Company amended its bylaws to change the name from Inspyr Therapeutics, Inc. to Rebus Holdings, Inc. No other changes were made to the bylaws.

 

ITEM 6. EXHIBITS

 

The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Form 10-Q.

 

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SIGNATURES

 

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed by the undersigned hereunto duly authorized.

 

 REBUS HOLDINGS, INC.
  
Date: November 12, 2021/s/ Raul Silvestre
 Chief Executive Officer
 

(Principal Executive Officer,

Principal Financial Officer and

Principal Accounting Officer)

 

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INDEX TO EXHIBITS

 

      Incorporated by Reference
Exhibit
No.
 Description Filed
Herewith
 Form Exhibit
No.
 File No. Filing
Date
             
2.01 Form of agreement and Plan of Merger among Inspyr Therapeutics, Inc., Rebus Holdings, Inc., and Rebus Sub, Inc. dated September 28, 2021.   8-K 2.01 

000-55331

 10/4/21
             
3.01(i) Amended and Restated Certificate of Incorporation dated September 4, 2013   8-K 3.01 333-153829 9/6/13
             
3.02(i) Amendment to the Amended and Restated Certificate of Incorporation, effective August 1, 2016   8-K 3.01 333-153829 8/2/16
             
3.03(i) Amended and Restated Certificate of Incorporation dated October 21, 2016   8-K 3.01(i) 000-55331 11/10/16
             
3.04(i) Amended and Restated Certificate of Incorporation, effective September 30, 2019   8-K 3.01(i) 000-55331 9/30/19
             
3.05(i) Amended and Restated Certificate of Incorporation, effective June 26, 2020   8-K 3.01(i) 000-55331 6/29/20
             
3.06(ii) Amended and Restated Bylaws   8-K 3.02 333-153829 1/11/10
             
3.07(i) Certificate of Designation of Preferences, Rights and Limitations of Series A 0% Convertible Preferred Stock   8-K 3.01 000-55331 12/23/15
             
3.08(i) Certificate of Designation of Preferences, Rights and Limitations of Series B 0% Convertible Preferred Stock   8-K 3.01 000-55331 12/12/16
             
3.09(i) Certificate of Designation of Preferences, Rights and Limitations of Series C 0% Convertible Preferred Stock   8-K 3.01 000-55331 3/20/17
             
3.10(i) Certificate of Designation of Preferences, Rights and Limitations of Series D 0% Convertible Preferred Stock   10-K 3.08(i) 000-55331 4/26/19
             
3.11(i) Certificate of Designation of Preferences, Rights and Limitations of Series E 0% Convertible Preferred Stock   10-K 3.10(i) 000-55331 5/14/20
             
3.12(i) Certificate of Designation of Preferences, Rights and Limitations of Series F 0% Convertible Preferred Stock   8-K 3.01(i) 000-55331 10/8/20
             
3.13(i) Amended and Restated Certificate of Incorporation Effective November 27, 2020   8-K 3.01(i) 000-55331 11/27/20

 

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3.14(i) Amended and Restated Certificate of Incorporation of Inspyr Therapeutics, Inc. effecting 1-for-75 Reverse Stock Split   8-K 3.01(i) 000-55331 10/4/21
             
3.15(i) Certificate of Merger between Inspyr Therapeutics, Inc. and Rebus Sub, Inc.   8-K 3.02(i) 000-55331 10/4/21
             
3.16(ii) Rebus Holdings Bylaws dated November 11, 2021 *        
             
4.01Specimen of Common Stock Certificate   S-1 4.01 333-153829 10/03/08
             
4.02  Form of Series A Preferred Stock Certificate   8-K  4.01 000-55331 12/23/15
             
4.03 Form of Series B Preferred Stock Certificate   8-K 4.01 000-55331 12/12/16
             
4.04 Form of Series C Preferred Stock Certificate   8-K 4.01 000-55331 3/20/17
             
4.05 Form of Series A, B and C Common Stock Purchase Warrant for May 2014 Registered Offering   S-1/A 4.34 333-194687 5/22/14

 

4.06 Form of Consultant Common Stock Purchase Warrant issued February, August 2014, January 2015 and May 2015   10-Q 4.38 333-153829 8/8/14
             
4.07 Form of Securities Purchase Agreement for July 2015 Private Placement   8-K 10.01 000-55331 7/6/15
             
4.08 

Form of Series D and E Common Stock Purchase Warrants for July 2015 Private Placement

   8-K 10.03 000-55331 7/6/15
             
4.09 Form of Securities Purchase Agreement for December 2015 Private Placement   8-K 10.01 000-55331 12/23/15

 

4.10 Form of Registration Rights Agreement for December 2015 Private Placement   8-K 10.02 000-55331 12/23/15
             
4.11 Form of Series F and Series G Common Stock Purchase Warrants for December 2015 Private Placement   8-K 10.03 000-55331 12/23/15
             
4.12 Form of Series H and I Common Stock Purchase Warrants for December 2015 Private Placement   8-K 10.05 000-55331 12/23/15
             
4.13 Form of Amendment Agreement from December 2015 Private Placement   8-K 10.04 000-55331 12/23/15
             
4.14 Form of Securities Purchase Agreement for December 2016 Private Placement   8-K 10.01 000-55331 12/12/16
             
4.15 Form of Series J, K and L Warrants for December 2016 Private Placement   8-K 10.03 000-55331 12/12/16

 

 43 

 

 

4.16 Form of Common Stock Purchase Warrant issued to 3rd party pursuant to Mr. Lowe’s Employment Agreement   S-1 4.41 333-215561 1/13/17
             
4.17 Form of Securities Purchase Agreement for March 2017 – April 2017 Private Placement   8-K 10.01 000-55331 3/20/16
             
4.18 Form of Securities Purchase Agreement for March 2017 – April 2017 Private Placement   8-K 10.01 000-55331 3/20/16
             
4.19 Form of Series M, N and O warrants for March 2017 – April 2017 Private Placement   8-K 10.02 000-55331 3/20/16
             
4.20 Form of Series D Preferred Stock Certificate   10-K 4.45 000-55331 4/26/19
             
4.21 Form of Series E Preferred Stock Certificate   10-K 4.36 000-55331 5/14/20
             
10.01   Exclusive Supply Agreement between GenSpera and Thapsibiza dated April 2012 that expires April 6, 2022   10-K  10.01   333-153829 3/29/13 
             
10.02** Form of Indemnification Agreement with Directors and Officers   8-K 10.01 000-55331 9/12/16
             
10.03** Form of Proprietary Information, Inventions and Competition Agreement   8-K 10.01 000-55331 8/10/16
             
10.04 Form of Share Exchange Agreement between Inspyr Therapeutics and Lewis & Clark Pharmaceuticals   8-K 10.01 000-55331 8/03/17
             
10.05 Form of Share Escrow Agreement pursuant to Lewis & Clark Share Exchange Transaction   8-K 10.02 000-55331 8/03/17
             
10.06 Form of Exchange Agreement for September 2017 Private Placement   8-K 10.01 000-55331 9/12/17
             
10.07 Form of Senior Convertible Debenture due 9/12/18 issued pursuant to Exchange Agreement   8-K 10.02 000-55331 9/12/17
             
10.08 Form of Securities Purchase Agreement for September 2017 Private Placement   8-K 10.01 000-55331 9/12/17
             
10.09 Form of Senior Convertible Debenture due 9/12/17 issued pursuant to Securities Purchase Agreement   8-K 10.02 000-55331 9/12/17
             
10.10 Form of Securities Purchase Agreement for July 2018 Private Placement   8-K 10.01 000-55331 7/3/18
             
10.11 Form of Debenture for July 2018 Private Placement   8-K 10.02 000-55331 7/3/18
             
10.12 Form of Securities Purchase Agreement for January 2019 Preferred Stock Offering   10-K 10.23 000-55331 4/26/19
             
10.13 Form of Debenture for March 2020 Private Placement   8-K 10.01 000-55331 3/6/20
             
10.14 Form of Securities Purchase Agreement for May 2020 Preferred Stock Offering   10-K 10.25 000-55331 5/14/20
             
10.15 Termination of Licensing Agreement with Ridgeway Therapeutics, Inc. dated October 5, 2020   8-K 10.01 000-55331 10/8/20

 

 44 

 

 

10.16 Form of Debenture for October 2020 Private Placement   8-K 10.01 000-55331 10/29/20
             
10.17 Conversion Price Adjustment Agreement with Sabby Entities dated November 25, 2020   8-K 10.01 000-55331 11/27/20
             
10.18 Form of Convertible Debenture for January 2021 Private Placement   8-K 10.01 000-55331 1/12/21
             
10.19 Form of Convertible Debenture for June 2021 Private Placement   8-K 10.01 000-55331 6/21/21
             
31.1 Certification of the Principal Executive Officer Pursuant to Section 3.02 of the Sarbanes-Oxley Act of 2002. *        
             
31.2 Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *        
             
32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C § 1350. *        
             
32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C § 1350. *        
             
99.01 Audit Committee Charter   10-K 99.01 000-55331 4/26/19
             
99.02 Leadership Development and Compensation Committee Charter   10-K 99.02 000-55331 4/26/19
             
99.03 Nominating and Governance Committee Charter   10-K 99.03 000-55331 4/26/19
             
101.INS   XBRL Instance Document         
             
101.SCH  XBRL Taxonomy Extension Schema         
             
101.CAL  XBRL Taxonomy Extension Calculation Linkbase         
             
101.DEF  XBRL Taxonomy Extension Definition Linkbase         
             
101.LAB  XBRL Taxonomy Extension Label Linkbase         
             
101.PRE  XBRL Taxonomy Extension Presentation Linkbase          

  

 

 

*Filed Herein
**Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.

 

46