Note 1 – Organization and Description of the Business

Business Activities and Organization

We are a clinical-stage biopharmaceutical company focused on utilizing the Processa Regulatory Science Approach including the principles associated with FDA’s Project Optimus Oncology initiative and the related FDA Draft Guidance, in the development of NGC oncology drug products. Our mission is to provide better treatment options than those that presently exist by extending a patient’s survival and/or improving a patient’s quality of life. This is achieved by taking FDA-approved, widely used oncology drugs or the cancer killing metabolites of these drugs and altering how they are metabolized and/or distributed in the body, including how they are distributed to the actual cancer cells. By changing either the metabolism, distribution and/or elimination of already FDA-approved cancer drugs while maintaining the mechanism of how the drug kills cancer cells, we believe our three Next Generation Chemotherapy (NGC) treatments will provide improved safety-efficacy profiles when compared to their currently marketed counterparts - capecitabine, gemcitabine, and irinotecan. All future studies of these drugs are subject to availability of capital to conduct the trials.

The three NGC treatments in our pipeline are as follows:

Historically, much of oncology drug development has searched for a new or different way to treat cancer. Our approach is to modify and improve three different, currently approved, and widely used chemotherapy treatments so that the human body handles these NGC treatments differently than their presently approved counterpart drugs while the cancer killing mechanism of action remains the same. FDA’s Project Optimus Oncology initiative and Oncology Guidance recommends that the dose-response (both safety and efficacy) relationships be evaluated for all oncology drugs. We have begun this process for our NGC treatments. To date, we have found that our NGC treatments are likely to have a better safety-efficacy profile than the current widely used marketed counterpart drugs, not only potentially making the development and approval process more efficient, but also differentiating our NGC treatments from the existing treatment. We believe our NGC treatments have the potential to extend the survival and/or quality of life for more patients diagnosed with cancer while decreasing the number of patients who are required to dose adjust or discontinue treatment because of side effects or lack of response.

As part of our shift in priority, including the allocation of resources to NGC drugs, we suspended further enrollment in the PCS499 trial for uNL. We are evaluating options to monetize both PCS12852 and PCS499. The clinical study findings for PCS12852 were positive in gastroparesis patients and there were no safety concerns noted during the conduct of either study.

Recent Financings

Registered Direct Offering

On February 9, 2023, we entered into a securities purchase agreement (the “Purchase Agreement”) relating to the issuance and sale of shares of common stock pursuant to a registered direct offering (the “Offering”) with certain accredited investors (the “Investors”). The Investors purchased approximately $6.3 million of shares, consisting of an aggregate of 7,812,544 shares of common stock at a purchase price of $0.80 per share. The Purchase Agreement provides that, subject to certain exceptions, until the earlier of (i) 90 days after the closing of the Offering or (ii) the trading day following the date that our common stock’s closing price exceeds $2.00 for a period of 10 consecutive trading days neither we nor our subsidiary will issue or enter into any agreement to issue or announce the issuance or proposed issuance of any shares of common stock or common stock equivalents.

The net proceeds from the Offering, after deducting the fees of the Placement Agent, Spartan Capital Securities, LLC (“Spartan”), and the estimated offering expenses, were approximately $5.7 million. The Offering closed on February 14, 2023.

The common stock was offered and sold pursuant to our Registration Statement on Form S-3 (Registration No. 333-257558) previously filed with the Securities and Exchange Commission and declared effective on July 9, 2021, the base prospectus included therein and the related prospectus supplement dated February 9, 2023.

We paid the Placement Agent a cash fee of 8.0% of the gross proceeds from the Offering, excluding proceeds received from our insiders, and reimbursed the Placement Agent for legal fees of $60,000. The engagement agreement with the Placement Agent requires us to indemnify the Placement Agent and certain of its affiliates against certain customary liabilities. We also amended our consulting agreement with Spartan, entered into on August 24, 2022, extending the term of the consulting agreement until February 10, 2024. We will compensate Spartan for financial consulting services provided under the amendment by granting Spartan warrants to purchase 3,160,130 shares of our common stock on April 17, 2023 with an exercise price of $1.02. The warrants will expire three years from the date of issuance and contain both call and cashless exercise provisions.

At-the-Market Transactions

On August 20, 2021, we entered into an equity distribution agreement (the “Sales Agreement”) with Oppenheimer & Co. Inc. (the “Sales Agent”) under which we may issue and sell in a registered “at-the-market” offering shares of our common stock having an aggregate offering price of up to $30.0 million from time to time through or to our Sales Agent (the “ATM Offering”). We expect to use net proceeds from the ATM Offering over time as a source for working capital and general corporate purposes. We are not obligated to make any sales of our common stock under the Sales Agreement and no assurance can be given that we will sell any shares under the Sales Agreement, or, if we do, as to the price or amount of shares that we will sell, or the dates on which any such sales will take place. We will pay the Sales Agent an aggregate of up to 3.0% of the gross proceeds of the sales price per share of common stock sold through the Sales Agent under the Sales Agreement. The shares under the ATM Offering will be sold and issued pursuant to our S-3 shelf registration statement (Registration No. 333-257588), declared effective on July 9, 2021.

On February 3, 2023, we sold 569,648 shares of our common stock under the ATM Offering resulting in net proceeds of $672,393. We did not sell any shares under our ATM Offering during the year ended December 31, 2022 and sold 21,597 shares of our common stock during the year ended December 31, 2021 for aggregate net proceeds of approximately $174,000. On February 5, 2023, we suspended the Sales Agreement and terminated the prospectus supplement.

Equity Line of Credit Transactions

On March 23, 2022, we entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park has committed to purchase up to $15.0 million of shares (the “Purchase Shares”) of our common stock, subject to the terms and conditions in the Purchase Agreement. We issued 123,609 shares of common stock (valued at $450,000) to Lincoln Park as a commitment fee in connection with entering into the Purchase Agreement and reimbursed Lincoln Park $25,000 for fees incurred in connection with the Purchase Agreement. Concurrently with entering into the Purchase Agreement, we also entered into a registration rights agreement with Lincoln Park (the “Registration Rights Agreement”), pursuant to which we agreed to take certain actions relating to the registration under the Securities Act of 1933, as amended, of the offer and sale of the shares of common stock available for issuance under the Purchase Agreement.

We did not draw on our Equity Line of Credit with Lincoln Park in 2022. In January 2023, we sold Lincoln Park 50,000 shares of our common stock for proceeds of $54,000.

Impairment of PCS499 In-process Research and Development Asset

In February 2023, we suspended further enrollment in our PCS499 trial for uNL due to difficulties we encountered in enrolling our PCS499 trial for uNL. As a result, we recognized a non-cash expense of $7.3 million at December 31, 2022 related to the impairment of the intangible asset for PCS499 (see Note 3). We originally recognized this intangible asset in conjunction with its acquisition from CoNCERT Pharmaceuticals, Inc. in 2018.