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| | Table of Contents | |
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| PART I | | 6 |
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| Item 1. | Business | 6 |
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| Item 1A. | Risk Factors | 33 |
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| Item 1B. | Unresolved Staff Comments | 65 |
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| Item 1C. | Cybersecurity | 66 |
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| Item 2. | Properties | 66 |
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| Item 3. | Legal Proceedings | 66 |
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| Item 4. | Mine Safety Disclosures | 67 |
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| PART II | | 67 |
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| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 67 |
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| Item 6. | Reserved | 68 |
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| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 68 |
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| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 76 |
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| Item 8. | Financial Statements and Supplementary Data | 77 |
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| Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 77 |
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| Item 9A. | Controls and Procedures | 77 |
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| Item 9B. | Other Information | 78 |
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| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 78 |
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| PART III | | 78 |
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| Item 10. | Directors, Executive Officers and Corporate Governance | 78 |
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| Item 11. | Executive Compensation | 79 |
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| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 79 |
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| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 79 |
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| Item 14. | Principal Accounting Fees and Services | 79 |
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| PART IV | | 79 |
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| Item 15. | Exhibits, Financial Statement Schedules | 79 |
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| | Signatures | 82 |
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SUMMARY OF THE MATERIAL AND OTHER RISKS ASSOCIATED WITH OUR BUSINESS
Our business is subject to numerous material and other risks and uncertainties that you should be aware of in evaluating our business. These risks include, but are not limited to, the following:
| ● | We may not be successful in consummating the Merger. |
| ● | If we are successful in completing the Merger, we may be exposed to other operational and financial risks. |
| ● | If the Merger is not completed, our board of directors may pursue a dissolution and liquidation. In such event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation and the amount of cash that will need to be reserved for commitments and contingent liabilities. |
| ● | Failure to complete the Merger may result in either Jade or us paying a termination fee to the other party and could harm our common stock price and the future business and operations of each company. |
| ● | Some of Jade’s and our executive officers and directors have interests in the Merger that are different from yours. |
| ● | We are a biopharmaceutical company with a limited operating history. |
| ● | We have incurred significant operating losses since our inception and anticipate that we will continue to incur losses for the foreseeable future. We may never achieve or maintain profitability. |
| ● | We have no products approved for commercial sale and have not generated any revenue from product sales. |
| ● | The results of earlier studies and trials may not be predictive of future trial results. |
| ● | We have six issued U.S. patents and many pending patent applications with respect to AV-101, however, we have begun the process of abandoning our patent estate and we are no longer prosecuting our patent applications. Further, we can provide no assurance that any of our future patent applications will result in issued patents. If we cannot protect our patent rights or our other proprietary rights, others may develop products similar or identical to ours, and we may not be able to compete effectively in our market or successfully commercialize any product candidates we may develop. |
| ● | We may be unable to obtain regulatory approval under applicable regulatory requirements. The denial or delay of any such approval would delay commercialization of any product candidates and adversely impact our potential to generate revenue, our business and our results of operations. |
| ● | Unfavorable global economic or political conditions could adversely affect our business, financial condition or results of operations. |
The material and other risks summarized above should be read together with the text of the full risk factors below and in the other information set forth in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes, as well as in other documents that we file with the U.S. Securities and Exchange Commission, or the SEC. If any such material and other risks and uncertainties actually occur, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks summarized above or described in full under Item 1A of this Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition and results of operations.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements about:
| ● | anticipated expenses and cost savings in connection with our discontinuation of development of AV-101; |
| ● | the proposed merger with Jade, and related transactions; |
| ● | estimates of our future expenses, revenues, capital requirements and our needs for additional financing; |
| ● | our expectations for clinical and regulatory development plans; |
| ● | our expectations regarding our ability to obtain and maintain intellectual property protection for any product candidates we may develop; |
| ● | our ability to identify products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives; |
| ● | the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates, including the projected terms of patent protection; |
| ● | potential regulatory developments in the United States and foreign countries; |
| ● | developments relating to our competitors and our industry, including the impact of government laws and regulations; |
| ● | our ability to retain key management personnel in order to operate our business following announcement of our workforce reduction plan and the proposed merger with Jade and related transactions; |
| ● | our ability to obtain additional funding for our operations, if needed, should we decide to pursue development of other product candidates; and |
| ● | other risks and uncertainties, including those listed under the section titled “Risk Factors.” |
In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed above under “Summary of the Material Risks Associated with Our Business” and under the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Annual Report on Form 10-K and the documents that we reference in this Annual Report on Form 10-K and have filed with the SEC as exhibits hereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.
The forward-looking statements in this Annual Report on Form 10-K represent our views as of the date of this Annual Report on Form 10-K. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Annual Report on Form 10-K.
This Annual Report on Form 10-K also contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from our own internal estimates and research as well as from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. While we are not aware of any misstatements regarding any third-party information presented in this Annual Report on Form 10-K, their estimates, in particular as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties and are subject to change based on various factors, including those discussed under the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
